Global equity funds see inflows after Fed rate cut By Investing.com

Investors worldwide have added to their positions in global equity funds, investing a net $5.21 billion in the week ending September 18, 2023. This investment activity comes as the market anticipated the Federal Reserve’s decision to cut the benchmark interest rate by a significant 50 basis points, starting a rate-cutting cycle to strengthen the economy. The rate cut has stimulated interest in risky assets, benefiting equities and commodities.

In the week before the rate cut, the equity fund had already seen significant net additions of $6.54 billion. This trend continued as the Federal Reserve’s actions encouraged investors to take more risk, reflected in positive net investment in various regions.

Asian equity funds, for example, recorded net inflows for the 16th consecutive week, attracting about $2.77 billion. European funds also saw a surge in interest, with net investments of $3.29 billion.

However, risk appetite was not uniform across markets. In the United States, net purchases declined, with equity funds recording their best inflow in four weeks at $1.37 billion. Sector-specific funds are also feeling the change in investor sentiment, with net outflows of around $1.2 billion for the third week in a row. The financial and technology sectors were hit hardest, with net sales of $950 million and $606 million, respectively.

A significant reversal in money market funds indicated increased risk appetite among investors, as about $16.06 billion was withdrawn after a six-week streak of net buying. Global bond funds, on the other hand, remained attractive, recording inflows totaling $11.24 billion for the 39th consecutive week. This included $2.3 billion in short-term bond funds and $1.71 billion in high yield bonds, while government bond funds saw outflows of about $218 million.

The commodities sector also showed a mixed picture. Gold and other precious metal funds attracted investors for the sixth week in a row, with net purchases of around $544 million. Energy funds, on the other hand, saw a reversal of the four-week trend of inflows, with net sales of $129 million.

Emerging market funds also presented a contrast, with equity funds recording net outflows of $293 million for the 15th consecutive week. Bond funds in these markets bucked the trend, securing $416 million, marking the 13th consecutive week of inflows.

These investment patterns underscore the market’s reaction to the Federal Reserve’s significant rate cut on September 18, 2023, as investors recalibrate their portfolios in response to changing monetary policy.

Reuters contributed to this article.

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