U.S. equity funds attract first weekly inflow in three weeks before Fed easing

U.S. investors returned to equity funds for the first time in three weeks during the period ending December 10, as expectations grew that the Federal Reserve might reduce interest rates in its upcoming policy meeting. According to LSEG Lipper data, net purchases of U.S. equity funds totaled $3.3 billion during the week, reversing the previous week's outflow of $3.52 billion.

Despite this shift towards equities, investors remained cautious about the future performance of artificial intelligence companies, especially after Oracle's earnings report failed to meet market expectations. Concerns over slower-than-expected profitability in this sector persisted.

Sector-specific U.S. equity funds saw a substantial inflow of $2.81 billion, marking the highest weekly gain since October 22, when the sector saw a net purchase of $4.03 billion. Among these, funds in the metals and mining, industrials, and healthcare sectors attracted $672 million, $548 million, and $527 million, respectively.

Meanwhile, U.S. bond funds experienced a notable net inflow of $3.49 billion, a significant increase from the $291 million recorded the week before. Investors favored short-to-intermediate investment-grade funds, which saw $2.61 billion in net purchases, the largest in seven weeks. On the other hand, general taxable fixed-income funds saw a net outflow of $902 million.

Money market funds, however, experienced a sharp outflow of $4.58 billion, following a substantial $105.03 billion net inflow the previous week.