With U.S. interest rates climbing, stock-buybacks accelerating, the second quarter earnings season still four weeks away and growth in the “real” global economy losing momentum, sector-focused investors followed the mergers, acquisitions and buyback money during the second week of June and increased their exposure to the U.S. consumer’s willingness to keep spending.
U.S. consumer goods sector funds took in fresh money for the third straight week, with the latest inflows the biggest in 12 weeks, ahead of retail data showing consumer spending at a six-month high. Analysis of U.S. equity fund allocation data shows that domestically domiciled funds continue to have a larger weighting for consumer discretionary plays than funds domiciled overseas.
Domestically based funds also have smaller allocations to the U.S. shale and technology stories than their peers located overseas. Technology sector funds overall have posted inflows for seven straight weeks and 17 of the 21 weeks year-to-date. Flows to dedicated China Technology Sector Funds are holding up despite the war of words with the U.S. over intellectual property and the large first quarter loss posted by smartphone maker Xiaomi.
Healthcare and Biotechnology Sector Funds recorded their third largest weekly inflow year-to-date as mergers and acquisitions activity in the sector picks up steam and companies continue to buy back their shares.
The anticipated hike in U.S. interest rates on June 13 kept the pressure on Real Estate Sector Funds, which saw over $800 million flow out, and Gold Funds posted consecutive weekly outflows for the first time since early February.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.
