Global Equity Fund Inflows Crash 86%, Stretched Tech Valuations and Sticky Inflation Ignite Fed Rate Hike Fears

Global equity fund inflows slowed sharply in the week to June 24, as concerns over debt-funded technology spending and a hawkish stance of the U.S. ​Federal Reserve cooled risk appetite.

Investors purchased a net $7.51 billion worth of global ‌equity funds during the week, down about 86% from net buying of $55.53 billion in the previous week, according to LSEG Lipper data.

The slowdown came as investors grew more wary of stretched technology ​valuations, with debt-funded spending by major tech companies drawing closer scrutiny. Elon ​Musk's SpaceX joined other mega-cap names in tapping bond markets, adding to ⁠concerns that the sector's investment boom is increasingly reliant on borrowing. 

Sentiment was also ​pressured by persistent rate concerns, as Thursday's Commerce Department data showing May PCE inflation at ​4.1%, its highest since April 2023, reinforced expectations of a possible 25-basis-point Fed hike later this year.

European and Asian equity funds drew inflows of $6.28 billion and $2.95 billion, respectively, during the week, down ​from $11.71 billion and $3.82 billion in the previous week. Meanwhile, U.S. funds recorded $3.53 billion in ​outflows.

Technology sector funds logged weekly net outflows of $17.83 billion, broadly reversing the previous week's $21.5 billion in ‌inflows. ⁠Financial and industrial sector funds also recorded net sales of $750 million and $1.04 billion, respectively.

Investors, meanwhile, bought a net $10.85 billion worth of bond funds, extending their recent buying streak into a 12th straight week.

Global hard-currency bond funds, short-term bond funds and dollar-denominated medium-term ​bond funds attracted ​notable inflows of $3.1 ⁠billion, $2.42 billion and $1.87 billion, respectively.

Money market funds posted outflows of $42.8 billion during the week, the largest weekly withdrawal since April 15.

Among ​commodity funds, gold and other precious metal funds recorded a sixth ​consecutive weekly ⁠outflow, with net sales of $545 million. Energy funds also posted weekly net sales of $81.9 million, following two successive weeks of inflows.

In emerging markets, the selling streak in equity ⁠funds extended ​into a ninth straight week, with $3.39 billion in ​net sales. Bond funds, however, attracted $132 million, their first inflow in three weeks, data covering 28,875 funds showed.

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