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FUND FLOWS: Real Estate and Consumer Goods Retreat

In wake of last week’s rate hike, investors pulled back from consumer goods funds, sensing inflation isn’t translating into real wage gains.

In the days leading up to the third interest rate hike in the current U.S. tightening cycle sector-focused investors pulled back, as expected, from Real Estate and Consumer Goods Sector Funds. They also redeemed money from Financial and Health Care/Biotechnology Sector Funds while Utilities Sector Funds recorded their largest weekly inflow since the final week of 2Q16.

The outflows from Consumer Goods Sector Funds were the second in a row and may, according to Informa Global Intelligence’s Chief Macro Strategist David Ader, reflect more than the prospect of dearer consumer credit. In a recent note, he observed that the latest headline inflation rate of 2.7 percent “pulls real year-on-year hourly earnings down to 0 percent and real average weekly earnings growth to -0.3 percent. In short, higher inflation isn’t translating to real wage gains. Until it does, I think real people will not accelerate their spending habits tremendously.”

 

Real Estate Sector Funds posted their biggest outflows YTD. Funds with U.S. and global mandates accounted for the bulk of the week’s redemptions while Japan Real Estate Sector Funds posted outflows for only the second time since the beginning of 3Q16.

Flows into Energy Sector Funds climbed to a 17-week high, with the bulk of the week’s inflows going to U.S.-focused Energy ETFs. YTD this fund group is the worst performer among the 11 major groups tracked by EPFR Global.

Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.

TAGS: Real Estate
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