US equity fund outflows as rate cuts hover in indecisive limbo

Coupled with the previous week’s net $11.5bn outflow, this signifies a large disposal between 10 and 17 January. Financial analysts chalk this up to the positive sales report for December 2023 and the Federal Reserve’s negative response to anticipated policy rate cuts in March 2024.

Reportedly, prominent US banks’ poor fourth quarter performance, such as Morgan Stanley (MS.N), also contributes to these market reactions. The LSEG breakdown shows that, per segment, multi-cap funds experienced the largest outflow, with traders withdrawing a net of $4.26bn. Sector fund data showed that investors sold $280m of discretionary, $232m of consumer staples and $153m of healthcare stocks.

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The information technology segment, however, topped the equity charts with a $371m inflow. The so-called Magnificent Seven all closed Friday’s trading in the green, with Microsoft (MSFT), Apple (AAPL), and Alphabet Inc. (GOOG) shares going for $398.67, $191.56 and $147.97, respectively. Nvidia Corporation (NVDA) jumped 4.17% to $594.91.

Reuters quoted Christoper Rupkey, a chief economist at FWDBONDS in New York on 17 January 2024, who summed up the present economic climate:

The economy is still flying high enough, and economists can take down those recession forecasts this year. For Fed officials, the economy is not too hot and not too cold, but it is just right perhaps for a few interest rate cuts in 2024.