Investors Pull $50.2 Billion from U.S. Equity Funds

(Reuters) – Investors pulled a net $50.2 billion from U.S. equity funds in the week ending Dec. 18, according to LSEG Lipper data, marking the biggest net outflow since September 2009. This decision reflects a profit-taking move ahead of the Federal Reserve's policy decision.

The Fed cut interest rates as expected on Wednesday, but projected fewer cuts and higher inflation next year. Chair Jerome Powell emphasized the need for caution, which triggered a sell-off in equity markets.

Investors withdrew $20.93 billion from U.S. large-cap funds, ending a six-week streak of net purchases. They also shed small-cap, multi-cap, and mid-cap funds, with outflows of $5.41 billion, $3.91 billion, and $2.85 billion respectively.

U.S. sectoral funds experienced net sales for the third consecutive week, totaling $1.53 billion. The tech and healthcare sectors recorded the largest outflows at $1.32 billion and $324 million respectively, while the financial sector saw net purchases of $578 million during the period.

For the first time in 29 weeks, U.S. debt funds faced a drop in demand, with a net withdrawal of $2.1 billion. Specifically, U.S. government bond funds saw their biggest outflow since October 2, amounting to $2.23 billion. In contrast, general domestic taxable fixed income and loan participation funds attracted inflows of $2.08 billion and $1.01 billion respectively.

U.S. money market funds recorded a fourth weekly outflow in five weeks, amounting to $28.07 billion.