BENGALURU, India — U.S. equity funds experienced significant withdrawals for the fourth consecutive week, reflecting investor uncertainty regarding tariffs and a keen focus on upcoming U.S.-China trade negotiations. Data from LSEG Lipper indicated that investors pulled approximately $16.22 billion from U.S. equity funds during the week ending May 7, marking the largest outflow since mid-March.
Despite the bearish trend, recent developments have sparked some cautious optimism among investors. A newly announced trade agreement between the United States and Britain has raised hopes for potential progress in tariff discussions with other nations. In addition, President Donald Trump hinted at constructive dialogues with China that might result in reduced tariffs, suggesting a shift in sentiment.
Mark Haefele, the chief investment officer at UBS Global Wealth Management, emphasized the enduring attractiveness of U.S. equities, projecting a year-end target of 5,800 for the S&P 500 index. His commentary reflects a belief that underlying fundamentals still support the equity market despite short-term volatility.
The outflows were particularly pronounced in large-cap and mid-cap equity funds, which collectively saw withdrawals of $13.6 billion and $1.12 billion, respectively. However, outflows from small-cap equity funds receded to a six-week low of $917 million, possibly indicating consolidation in this sector.
Sector-specific trends revealed that investors exited financial, technology, and metals and mining funds, contributing to a total of $2.89 billion in net sales across U.S. sectoral funds. This trend underscores a shifting focus away from certain high-growth sectors amid broader market uncertainties.
Conversely, sentiment toward U.S. fixed-income markets improved, as investors directed a net $3.53 billion into bond funds—the highest inflow in eight weeks. Purchases of short- and intermediate-term government and treasury funds reached $1.15 billion, a notable rebound from the net sales of $765 million recorded the previous week. Furthermore, municipal debt funds attracted a net inflow of $1.06 billion.
In a significant shift, investors also made substantial contributions to money market funds, registering net purchases of $28.4 billion. This marked the largest weekly influx since early March, as investors appear to be seeking refuge in safer, more liquid assets during a period of heightened market volatility.
The current market dynamics reflect a complex interplay between ongoing trade negotiations and shifts in investor behavior, illustrating the delicate balance that defines the U.S. economic landscape. As discussions continue, the eventual outcomes may have lasting implications for both equity and bond markets.