Surge in U.S. Money Market Funds as Trade Tensions Loom
U.S. money market funds experienced major inflows as investors sought safety amid rising U.S. tariffs and trade uncertainties. U.S. bond funds saw $4.8 billion in net inflows, while equity funds faced outflows of $7.42 billion. The week recognized the largest purchase of money market funds since December 2024.
In a significant display of investor caution, U.S. money market funds saw massive inflows in the week ending June 4. This trend was largely spurred by investor concerns over ascending U.S. tariffs on steel imports and ongoing trade disputes with China under President Donald Trump. The uncertain financial landscape pushed many to seek refuge in safer investment avenues, resulting in a net purchase of $66.24 billion in money market funds, the largest weekly inflow since December 2024, according to LSEG Lipper data.
Meanwhile, riskier equity funds took a hit, experiencing a net outflow of $7.42 billion, significantly higher than the previous week's disposals of around $5.39 billion. The small-cap segment, in particular, suffered drawdowns amounting to $2.99 billion, marking the largest weekly outflow since April 30. Multi-cap, mid-cap, and large-cap funds also recorded outflows of $2.13 billion, $1.05 billion, and $962 million, respectively.
Sectoral funds fared slightly better with an inflow of $136 million as technology and consumer staples funds gained $1.15 billion and $309 million respectively. Despite a cooling in bond fund inflows to a four-week low of $4.8 billion, short-to-intermediate investment-grade funds became increasingly popular, attracting a net $3.98 billion during the week. Inflation-protected and general domestic taxable fixed income funds also showed strength, drawing $634 million and $505 million in inflows.
(With inputs from agencies.)
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