Global equity funds face huge outflows ahead of Fed rate decision

Investors liquidated equity funds at the fastest rate in 15 years in the week to December 18, driven by caution and profit-taking in anticipation of a hawkish outcome from the US Federal Reserve's policy meeting after a recent market rally, reports Reuters.
According to LSEG Lipper data, investors divested a net $37.22 billion worth of global equity funds in the week, the largest amount for a single week since September 2009.
The Fed cut rates as expected on Wednesday and signaled fewer rate cuts and projected higher inflation for next year, prompting a sell-off in global equities after Chair Jerome Powell emphasized the need for caution.
The MSCI World index has declined more than 3% this week and is set for its sharpest weekly fall in three and a half months.
Investors offloaded a robust $50.2 billion worth of US equity funds, logging the biggest weekly net sales since September 2009. European and Asian funds, however, experienced $9.21 billion and $1.74 billion worth of net purchases.
Meanwhile, global sectoral funds experienced their largest weekly outflow in 14 weeks, totalling $2.65 billion, with the tech and healthcare sectors facing net disposals of $1.37 billion and $737 million respectively.
Global bond funds continued to attract investor interest for a 52nd consecutive week, securing about $2.36 billion in net purchases, albeit the lowest amount in eight months.
Corporate and loan participation funds drew substantial inflows of $2.01 billion and $1.12 billion, respectively. Meanwhile, government bond funds experienced $594 million in outflows, marking a third consecutive week of net sales.
Money market funds recorded about $51.02 billion in net sales, marking the fourth outflow in five weeks.
In the commodities sector, gold and precious metal funds saw $1.67 billion withdrawn, the largest since July 2022, while energy funds experienced $215 million in outflows.
According to data covering 29,603 funds, emerging market equities faced increased selling pressure, with equity funds recording their sharpest net outflow in about a year at $5.27 billion, and bond funds also seeing $710 million in net outflows.