U.S. Equity Funds Experience Outflows Amid Geopolitical Concerns

(Reuters) – U.S. equity funds witnessed their fourth weekly outflow in five weeks leading up to Feb. 5. This trend is attributed to increased geopolitical risks stemming from President Donald Trump’s new trade tariffs on China, coupled with investor apprehension over disappointing earnings from major technology companies.

According to data from LSEG Lipper, investors divested a net amount of $10.71 billion from U.S. equity funds, marking the largest weekly sales since Dec. 18, 2024.

Concerns were amplified by lackluster cloud revenue growth reported by Alphabet (NASDAQ: GOOGL) along with its significant investments in artificial intelligence. Similarly, weak data center sales forecasts from Advanced Micro Devices (NASDAQ: AMD) heightened fears regarding substantial AI spending.

During this period, investors withdrew a remarkable $6.44 billion from large-cap equity funds, the highest outflow since Dec. 18. Small-cap, multi-cap, and mid-cap funds also witnessed redemptions of $2.02 billion, $1.12 billion, and $335 million, respectively.

Conversely, sectoral funds attracted $1.2 billion in inflows for the third consecutive week, particularly in financials and consumer discretionary, which garnered $1.01 billion and $907 million, respectively.

On the safer side, money market funds became a focal point for investors, resulting in a net acquisition of $39.61 billion, following $35.13 billion in net sales from the previous week.

Bond funds remained favorable for the fifth week in a row, drawing in $9.22 billion worth of inflows. Popular options included U.S. general domestic taxable fixed income funds, short-intermediate investment-grade funds, and loan participation funds, which amassed $4.64 billion, $3.31 billion, and $2.93 billion, respectively, in inflows.