U.S. equity funds faced heavy selling pressure during the week ending June 24, as worries about debt-driven spending in the technology industry and the prospect of a more aggressive Federal Reserve interest rate policy led investors to pull back from riskier assets.
According to data from LSEG Lipper, investors withdrew $3.53 billion from U.S. equity funds over the course of the week. That marked a significant reversal from the prior week, when investors had poured a net $37.63 billion into those same funds.
A major factor weighing on investor confidence was concern that technology sector valuations have become stretched, with large tech companies increasingly turning to bond markets to finance their spending. Elon Musk’s SpaceX became the latest high-profile name to tap debt markets, adding to growing unease that the tech industry’s investment surge is being built on borrowed money.
Adding to the cautious mood, investors are bracing for the possibility that the Federal Reserve could raise interest rates by 25 basis points later this year, as inflationary pressures continue to build.
Technology sector funds bore the brunt of the selloff, recording nearly $20 billion in outflows for the week — completely reversing the $21.46 billion in inflows seen the week before. Financial sector funds lost $1.06 billion, industrial funds shed $830 million, and consumer discretionary funds saw $733 million in outflows.
On the bond side, inflows into U.S. bond funds dropped to an eight-week low of $7.33 billion. Short-to-intermediate investment-grade funds drew $2.95 billion, general domestic taxable fixed-income funds attracted $2.03 billion, and municipal debt funds pulled in $633 million — all down from the previous week’s figures of $3.09 billion, $3.39 billion, and $1.19 billion, respectively.
Money market funds recorded net outflows of $25.74 billion for the week, marking their largest single-week exodus since April 15.
