Unprecedented $21.93B Withdrawn From US Equity Funds Ahead Of Fed Decision

In the week leading up to June 12, U.S. equity funds witnessed their largest weekly outflow in 18 months. This comes as investors tread carefully in anticipation of the Federal Reserve’s policy decision.

What Happened: Data from LSEG reveals that investors pulled out a net $21.93 billion from U.S. equity funds during the week, the biggest weekly net disposal since mid-December 2022.

Despite the Federal Reserve’s decision to maintain interest rates, the S&P 500 and the Nasdaq Composite continued to reach record closing highs for the third consecutive session. This was bolstered by data indicating a deceleration in inflation, reported Reuters.

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Large-cap equity funds were the most affected, experiencing outflows of $14.94 billion, the largest weekly outflow since Dec. 21, 2022. Multi-cap, mid-cap, and small-cap funds also faced net withdrawals of $2.37 billion, $1.43 billion and $816 million, respectively.

In contrast, investors directed their attention towards U.S. bond and money market funds, pouring in $1.72 billion and $20 billion, respectively. U.S. sector-specific equity funds experienced a second straight week of inflows, accumulating approximately $1.85 billion, with the majority, $1.8 billion, being invested in the technology sector.

U.S. bond funds experienced a net inflow of $4.82 billion, continuing their positive trend for the second week in a row. General domestic taxable fixed income funds in the U.S. attracted $2.44 billion, the largest amount in five weeks. Additionally, short/intermediate investment-grade funds and loan participation funds saw inflows of $841 million and $546 million, respectively.

Why It Matters: The significant outflows from U.S. equity funds highlight investor caution ahead of the Federal Reserve’s policy decision.

Despite the decision to keep interest rates unchanged, investors are showing a preference for safer investment vehicles like bond funds and money market funds.

This shift in investor behavior could potentially impact the performance of equity markets in the coming weeks.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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