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.

• In the last week of 2019 and the first week of the new year, mutual funds continued to post net outflows, again due to large net negative flows in equities. For the two weeks ended January 8, a net $31 billion was withdrawn from equities. Meanwhile, bonds enjoyed around $26 billion of net inflows.

• Equities were hit across the board, although domestic and large-cap stocks experienced the most outflows, with emerging markets and developed markets seeing the least outflows.

• Investment-grade and government bonds saw positive flows while high-yield bonds experienced small outflows. Hybrid mutual funds saw around $1.4 billion in outflows.

• The U.S. and China signed the so-called Phase One of the trade deal after 18 months of conflict between the world’s two largest economies. The deal aims to soothe U.S. concerns regarding the theft of intellectual property and forced technology transfers. At the same time, China will buy $200 billion worth of U.S. manufacturing, energy and agricultural goods over the next two years, while U.S. financial firms are expected to have increased access to the Chinese market. However, concerns still linger over how the U.S. could enforce the agreement, with some analysts worried that the deal could fall apart if the sides fail to monitor the implementation of the agreement.

• The European Central Bank’s first minutes with new President Christine Lagarde at the helm indicated that policymakers are optimistic about the Eurozone economy. The ECB board members noted signs of stabilization in output growth and an uptick in investor sentiment, although some were concerned about the weak industrial production. This suggests further monetary easing is unlikely.

• The International Monetary Fund (IMF) does not share ECB’s optimism, warning in its latest report that the global outlook remains stagnant without any turning point in sight. The IMF revised down its 2020 global growth forecast from 3.4% to 3.3%, in part due to lower expected growth in India. In 2021, the IMF expects growth of 3.4%.

• The U.S. economy added 145,000 jobs in the last month of 2019, declining from a strong 256,000 in the prior month. Average hourly earnings rose by 0.1%, disappointing analyst estimates of 0.3%. However, the prior month’s figure was revised up to 0.3% growth. The unemployment rate, meanwhile, stayed still at 3.5%.

• Despite full employment in the U.S., inflation is still relatively low, providing the Federal Reserve ample room for continuing its monetary easing policy. In 2019, the consumer price index (CPI) increased by 2.3%, slightly higher than the Fed’s mandate. Core CPI was also at the same level of 2.3%.

• U.K. inflation continued to drop in December and reached a three-year low of 1.3%. This represented a decline of 20 basis points versus the prior month.

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• Broad indices were largely upbeat in the first two weeks of the year.

• Technology stocks (NASDX) were the best performers from the pack with a rise of 4.4%.

• The only decliner for the past two weeks was Vanguard’s Total Bond Market Index (VBMFX), down by 0.18% and the worst performer from the pack.

• In major sectors, the picture was largely positive, with only one sector posting declines.

• The energy sector (VGELX) lost more than 1% for the past two weeks, as oil prices had a weak start to the year, despite worries about unrest in Libya and Iraq.

• At the other end of the spectrum is T. Rowe’s technology sector (PGTIX), which posted gains of nearly 6%, driven by strong gains of Alphabet, which joined Apple and Facebook in the category of companies worth more than $1 trillion.

• Foreign equities all posted gains with two exceptions.

• Indian equities (WIINX) surged nearly 4%, thanks in part to the trade deal signed between the U.S. and China.

• T. Rowe’s Latin American equities (RLAIX) lost 1.25%, shedding some of the gains it posted in the prior two weeks.

*Major asset classes all posted gains with two exceptions.

*John Hancock’s Multicurrency Fund (VFINX) shed 1.5% over the past two weeks, becoming the worst performer from the pack.

*Meanwhile, BlackRock’s Small-Cap Mutual Fund (CSGEX) continued to post strong gains these past two weeks, rising by 3.8%. Small caps were the best performers in the prior scorecard as well.

Flows failed to deliver the surprise in the first two weeks of the year, with strong equity outflows and not as solid bond inflows. Technology stocks’ performance stood out, with indices covering the sector gaining handsomely on the back of Alphabet and Apple’s strong start to the year. The energy sector and Latin American equities both posted weak performances.

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