The summer pattern for EPFR-tracked Developed Markets Equity Funds flows held during the week ending Aug. 16. Europe, Japan and Global Equity Funds extended inflow streaks ranging from five to 35 weeks while U.S. Equity Funds recorded outflows for the ninth straight week and 18th time in the past 22.
Actively managed U.S. Equity Funds again accounted for the bulk of the latest redemptions, with Large Cap Growth Funds experiencing the biggest outflows in cash terms and Small Cap Growth Funds in flows as a percent of AUM terms. Concern that stronger GDP growth could put rate hikes back on the table, fears that this bull market is in its final innings the latest missteps from U.S. President Donald Trump were among the headwinds facing U.S. equity markets in mid-August.
According to Charles Biderman, CEO of EPFR sister company TrimTabs Investment Research, the reluctance to bet on the U.S. recovery at this stage in the cycle is not confined to investors. Noting that new stock buybacks and capital expenditure by U.S. corporations have fallen sharply, Biderman observed that, "it could be that stock prices have gone too far, too fast for corporate America" and went on to argue that, with the stalling of U.S. President Donald Trump's reflationary agenda, corporations are unwilling to invest in additional capacity.
The same does not appear to be true of Japan, where some rosy second quarter 2017 GDP numbers included growth in business investment that was double market expectations. In the wake of that data's release, Japan Equity Funds enjoyed strong inflows, ending the week with their biggest total in four months. Yen-denominated commitments accounted for all of the headline number, with foreign currency redemptions hitting levels last seen late in the fourth quarter of 2014.
Europe Equity Funds took in fresh money for the 20th time in the past 21 weeks against a backdrop of improving macroeconomic data. Investors continue to buy into the reform story promised by newly elected President Emmanuel Macron, although the popularity of those proposals among French voters appears to be evaporating quickly. Meanwhile Greece Equity Funds chalked up their third consecutive outflow, the longest such run since February, despite improving business sentiment and a successful return to the bond markets last month.