Driven by expectations of a Federal Reserve rate cut, US stock funds rebounded after three consecutive weeks of outflows. For the week ending December 10, US stock funds recorded a net inflow of $3.3 billion, nearly offsetting the prior week's net outflow of $3.52 billion.
At the sector level, US equity sector funds attracted $2.81 billion in net inflows, marking the largest weekly inflow since late October. Metals & mining, industrials, and healthcare stood out, with net inflows of $672 million, $548 million, and $527 million, respectively.
Notably, while rate-cut optimism boosted overall risk appetite, investor enthusiasm for artificial intelligence (AI) stocks cooled. Oracle's weaker-than-expected earnings guidance heightened concerns about slowing profit growth in AI-related companies, signaling more cautious evaluations of high-valuation tech stocks despite monetary easing expectations. This shift also reflects investors' preference for traditional sectors benefiting from economic cycles and lower rates, rather than chasing previously high-flying tech names.
Bond Funds Gain Traction
The bond market also saw a significant lift from rate-cut expectations. US bond funds registered $3.49 billion in net inflows, surging from the prior week's $291 million. Flows showed structural trends: intermediate-term investment-grade bond funds drew $2.61 billion—the highest in seven weeks—while general domestic taxable fixed-income funds saw $902 million in outflows.
Money markets displayed a clear rotation, shifting from a massive $105.03 billion net inflow the previous week to a $4.58 billion outflow. This shift underscores investors' gradual move from low-yield cash assets to riskier equities and bonds amid anticipated monetary easing, aligning with typical asset allocation adjustments during policy loosening cycles.
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