May’s volatility as a result of U.S.-China trade negotiations breaking down paved the way for explosive gains for global equities during the month of June. According to the latest report on exchange-traded fund (ETF) flow data from State Street Global Advisors, global equities bounced back from a 6 percent loss in May with a 6 percent gain in June.

“Global equities got a “Powell-ful” boost in June, leading to the best June return ever,with 55% of the stocks now above their 50-day moving average, up from 30% in May,” said Matthew Bartolini, Head of SPDR Americas Research State Street Global Advisors.

While equities were the toast of the town in June, the month of May told a different story. Morningstar, Inc., a leading provider of independent investment research, reported that passive U.S. equity funds saw $2.7 billion in outflows while active U.S. equity funds lost $12.9 billion to outflows in May–$15.6 billion combined.

With additional funds reporting assets after the April fund flows report published, Morningstar data shows about $89.0 billion between active and passive U.S. equity funds reaching parity. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund, and net flow for U.S. ETFs shares outstanding and reported net assets.

Morningstar’s report about U.S. fund flows for May is available here. Highlights from the report include:

  • Fund flows were weak across the board in May, with long-term funds losing nearly $2.0 billion to outflows, the worst month year-to-date as investors cut risk. Money-market funds saw inflows of $82.0 billion, the group’s second-best month in 10 years.
  • Among category groups, taxable-bond inflows fell from $42.6 billion in April to $15.4 billion in May, the group’s worst showing year-to-date. Overall, credit-oriented high-yield bond and bank loan funds fared worst, losing $5.8 billion and $3.1 billion to outflows, respectively.
  • Among all U.S. fund families, Vanguard led with $16.7 billion in inflows, followed by $5.1 billion from Fidelity; iShares’ flows were flat. At the other end of the spectrum, State Street Global Advisors saw $22.6 billion in outflows, followed by Invesco’s $5.8 billion in outflows.
  • Invesco QQQ Trust, which holds a Morningstar Analyst Rating™ of Neutral, saw outflows of $3.3 billion in May. Conversely, active-oriented American Funds had $2.7 billion in inflows, with much of that demand coming through its target-date lineup.

To view the complete report, please click here.

A volatile May no doubt elicited a risk-off sentiment that permeated throughout the capital markets, causing high-yield bond funds to experience record outflows. Furthermore, with bond market mavens warning investors of headwinds in the fixed income space like the possibility of inverted yield curve, rising rates and BBB debt sliding out of investment-grade, investors need to be keen on where to look for opportunities to hide away when markets head downward.

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