The second week of August was another choppy one for EPFR-tracked Sector Fund flows. Investors changed their assessment of geopolitical risks and the U.S. Federal Reserve's willingness to raise interest rates during the second half of 2017. Meanwhile, they are still digesting macroeconomic numbers for Japan, Europe, China and the U.S. Financial Sector Funds, which absorbed over $950 million the previous week and experienced net redemptions of over $700 million. Healthcare/Biotechnology Funds also saw inflows turn to outflows while gold and infrastructure funds took in enough fresh money to cancel out the previous week's redemptions.
Investors did not change their tune when it came to Energy and Consumer Goods Sector Funds, pulling over $400 million from both groups. Persistently low oil prices remain a headwind for the former, slow wage growth and the disruption of the U.S. retail sub-sector by companies like Amazon for the latter. Both sectors are currently ranked as underweights in EPFR's Global Sector Strategy (see chart below).
The sector with the biggest current underweight in the strategy, Telecoms, has started to attract some investor support with Telecom Sector Funds attracting fresh money three of the past five weeks and posting consecutive weekly inflows for the first time since late May.
It was another good week for Industrial Sector Funds, whose investment case was buoyed by macroeconomic data from major markets showing, among other things, a sharp pick-up in capital spending by Japanese businesses and continued strength in the Eurozone manufacturing sector.