For the second week running, flows into EPFR Global-tracked Sector Fund groups were muted as investors waited for the first quarter of corporate earnings season to kick into high gear, weighed the implications of several geopolitical developments and speculated how much of the new U.S. administration’s economic agenda will actually make it into the statute books. Gold and Utilities Sector Funds recorded the biggest inflows during the week ending April 19 while Healthcare Sector Funds and Energy Sector Funds saw the biggest outflows.
Rising U.S. production and inventories are weighing on the outlook for oil prices (although rising discontent in Venezuela could put an additional squeeze on that country’s output in coming months) and Energy Sector Funds have now recorded three straight weeks of net outflows. Expectations for first-quarter earnings in the sector are high, with two U.S. bellwethers — Exxon and Chevron — due to report later this month.
Bigger stockpiles are also dampening investor appetite for Commodities Sector Funds that invest in assets other than precious metals. Reports of growing stocks of iron and nickel ore in Chinese ports have weighed on prices in recent weeks: iron ore prices are down some 30 percent from their year-to-date peak.
Earnings reports for major U.S. financial plays are already coming in. Daily data showed flows to Financial Sector Funds bottoming out early in the reporting period and turning positive as the week progressed. But Healthcare/Biotechnology Sector Funds saw redemptions pick up as Republican legislators signaled they will make another effort to reform the U.S. health care system.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.