In the week ending on January 31, significant inflows were observed in global equity funds, spurred by positive U.S. economic growth data and indications of ongoing moderation in price pressures as reflected in inflation readings. This set the stage for a more positive outlook on global economic growth, easing concerns over a potential recession and lowering investor expectations of future interest rate increases.
Investors were receptive to these messages and rewarded stocks, with the S&P 500 index up 2.5% for the week and the Nasdaq Composite up 1.2%. The Russell 2000 was the best performer of the broad-based domestic indices, followed by the Dow Jones Industrial Average and the S&P 500. In contrast, European and Japanese stocks lost ground for the week.
Flows to EPFR-tracked funds were robust, with only one of the 11 major Fund groups experiencing net redemptions for the week. The diversified Developed Markets equity funds group saw its three-week outflow streak end as commitments to funds with fully global mandates offset a fifth straight week of outflows from the Global ex-US equity funds group.
Inflows to other fund groups remained strong, led by money market funds, which have seen the most significant weekly inflow since mid-June. The group attracted a net of $28 billion, with Japan Money Market Funds seeing the most robust weekly inflows in nearly six months. Bond funds also drew in fresh capital for the week, with global high-yield funds receiving a record $12.5 billion in inflows and government and corporate bond funds seeing inflows of $5.7 billion.
The flows were primarily driven by investors still positioning for a rebound in risk sentiment following a volatile fourth quarter. Investors were buying equities as they anticipated a softer landing in the United States, evidence that interest rates have peaked, and a better-than-expected earnings season for companies worldwide.
As a result of the increased confidence in global risk assets, bond investors withdrew less cash from funds, with Money Market Funds recording net redemptions of just $160 million. The rest of the reduction in cash from funds came from the redemptions of Balanced and Target-Date Funds, which received a combined $3.6 billion in outflows for the week.
The Templeton Global Equity Group remains constructive on global equities in 2024, driven by the likelihood of a soft landing in the United States, easing inflation, evidence that interest rates have peaked, and stronger-than-expected earnings growth for companies globally. The global portfolio includes equities of various sizes and sectors worldwide, with a minimum of 50% invested in foreign companies. It is important to note that investing in any equity fund carries risk, including possible loss of principal. Please refer to the Prospectus for further details. Investing in foreign securities involves unique risks, including currency fluctuations and political instability. These risks may be more significant in emerging markets. Investments in smaller companies are more volatile than investments in larger, more established companies. Investing in international securities is more volatile than investments in U.S. securities, as the values of securities in foreign countries are likely to fluctuate more widely than investments in U.S. securities.
