Fears of a recession and central banks’ commitment to maintaining higher interest rates in order to contain inflation have caused the largest weekly outflows from global equity funds since March 2020.

According to Refinitiv Lipper data, there was a $33.6 billion net withdrawal in the week ending December 21.

In their final policy moves of the year, the US Federal Reserve and the European Central Bank increased interest rates last week, and the Fed Chair announced that additional rate increases would be made in 2023 to combat inflationary pressures.

Both the Federal Reserve and the European Central Bank have raised interest rates by a total of 400 basis points (bps) this year.

This year, the MSCI All Country stock index has lost about 20% of its value, more than undoing its 17% gain from 2021.

The largest weekly net outflow from global bond funds in more than two months was $14.1 billion. Money market funds reported $41 billion in net sales.

In terms of commodities, investors withdrew a net $523 million from energy funds, the most this year, while precious metal funds attracted a net $362 million, compared to an outflow of $220 million the previous week.

Data for 24,687 emerging market (EM) funds indicate that a net $664 million left bond funds while only a pitiful $195 million was added to equity funds.

(Adapted from Reuters.com)

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