Every fortnight, MutualFunds.com provides a snapshot of the performance of some key mutual funds which tries to accurately capture the investor interest in specific areas of the financial markets. The report is aimed at providing a quick overview of the sectors, regions and asset classes that moved in a meaningful manner during the last two weeks.
Flows were again negative for the two weeks ended October 30, with the divergence between equity and bond flows widening. A little more than $19 billion was withdrawn from equity mutual funds with all categories experiencing outflows. Meanwhile, investors plowed nearly $11 billion into bond mutual funds, with taxable and investment-grade bonds among the biggest beneficiaries.
The U.S. Federal Reserve slashed interest rates for the third time this year in a bid to support feeble growth. The U.S. central bank’s benchmark interest rate now stands at 1.75% versus 2% previously. At a press conference, Chair Jerome Powell strongly indicated that rates will remain steady in the near future, citing the country’s strong labor market and the inflation rate hovering close to its goal of 2%.
Bank of Japan decided to maintain its monetary policy unchanged but tweaked its forward guidance by saying it is ready to cut interest rates further in order to achieve its goal of 2% inflation.
Bank of England gave a clear signal that it is ready to cut interest rates if the economy slows further, amid slashes to its growth forecasts.
Consumer confidence in the U.S. held firm in October, with the Conference Board’s widely followed index slightly declining to 125.9 from 126.3 in September.
The U.S. economic output grew at an annualized rate of 1.9% in the third quarter, beating estimates of 1.6% growth but down from 2% in the second quarter. Consumer spending declined dramatically to 2.9% from 4.6% in the prior quarter.
Chinese manufacturing purchasing managers’ index fell to 49.3 in October from 49.8, the lowest reading since February 2019. Amid trade tensions and slowing global economy, the Chinese PMI has been in contraction territory for the sixth consecutive month.
Eurozone inflation dropped to 0.7% in October from 0.8% in the prior month, putting pressure on the European Central Bank to launch further stimulus measures to attain its goal of 2% inflation.
The U.S. job market seemed to roar ahead. The U.S. economy added 128,000 jobs in October, beating expectations of 90,000. Meanwhile, the previous month’s reading was revised up to 180,000. The unemployment rate rose slightly from 3.5% to 3.6%.
The U.S. manufacturing purchasing managers’ index rose marginally to 48.3 in November, although it still remains in contraction territory.
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Equities rallied over the past two weeks, as investors cheered central banks’ commitment to easing monetary policy and potential trade peace between the U.S. and China, even as hard data showed that the optimism may be misplaced.
The U.S. Nasdaq 100 fund (NASDX) gained 2.86% for the two weeks ended November 8, becoming the best performer from the pack.
Meanwhile, Vanguard’s total bond index fund (VTIBX) lost 0.69% of its value, underperforming its peers.
With two exceptions, sectors were all up.
Fidelity’s materials sector fund (FSCHX) has risen 5.9%, as the beleaguered industry had been plagued by volatility recently.
Utilities sector fund (FKUTX), meanwhile, lost 3.8% of its value becoming one of the worst performers from the pack.
All foreign equities were up with the exception of Latin America.
Japanese equities fund (HJPNX) gained 3.5%, as investors showed excitement about Bank of Japan’s strong hint that it will cut interest rates further.
Latin America equities fund (RLAIX) shed 2.45%, after surging more than 4% in the prior two weeks.
Major Asset Classes
Asset classes were mostly down.
BlackRock’s small-cap fund (CSGEX) is up more than 3% for the past two weeks, continuing the impressive performance it started around four weeks ago.
Managed futures fund (EVONX) was down 3.91%, the worst performer from the bunch.
The Bottom Line
Mutual funds saw net outflows for the two weeks ended October 30, with bonds’ positive flows failing to offset withdrawals from equities. Technology stocks have performed strongly, along with small-cap stocks and Japanese shares, while managed futures and utilities were pummeled.
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