(Reuters) – U.S.-based money-market funds attracted about $28 billion in the week ended Wednesday, their largest weekly inflow since mid-May, as the S&P 500 Index rose above 3,000 for the first time on Wednesday.
It was money funds’ third consecutive week of cash inflows, with a four-week moving average of $18.8 billion, according to data by Refinitiv’s Lipper.
The move in safe, conservative money-market funds is notable as the S&P 500 Index and the Dow Jones Industrial Average rose above 3,000 and over 27,000 for the first time, respectively, this week.
Earlier this year, BlackRock Chief Executive Larry Fink pointed out that mom-and-pop investors were under-invested in equity markets and that the group could put money to work in U.S. stocks if markets continue to rise. “We have a risk of a melt-up, not a meltdown here,” Fink said at the time.
From an economic standpoint, the net inflows into money market funds over the last three weeks could be seen as “investors putting money on the sidelines,” said Pat Keon, senior research analyst at Lipper.
“Money is taken out of play like this, particularly in stocks, during times of uncertainty,” he said. “Federal Reserve chairman Jerome Powell has pointed to the current uncertainty multiple times in the recent past with respect to the U.S.-China trade war, global growth concerns and the still tepid inflation data.”
For the week ended Wednesday, U.S.-based equity funds – which include both mutual funds and exchange-traded funds – attracted just $1 billion in the week, following three weeks of cash withdrawals.
Keon said this week’s inflows stem from “the strength of equity ETFs (Exchange-Traded Funds) with plus-$4.3 billion of inflows, while equity mutual funds saw negative $3.3 billion leave their coffers – the group’s 21st consecutive week of net outflows.”
The flows into equity ETFs were concentrated in one product, the SPDR S&P 500 ETF, which took in over $3.7 billion, Keon said.
“Domestic equity mutual funds were responsible for the lion’s share of the net outflows at negative $2.6 billion,” he said. “This is the continuation of a long-term trend as the group has had 22 straight weeks of net outflows for a total of -$87.1 billion.”
U.S.-based leveraged loan funds posted cash withdrawals of $332 million, extending their weekly outflow streak since November 2018.
“Loan funds have floating rates. So, a rising interest-rate environment is good for them, therefore the Fed’s actions have hurt this classification while helping the fixed-rate investment grade classifications,” Keon said.
Reporting by Jennifer Ablan; Editing by Susan Thomas and Bill Berkrot