U.S. equity fund outflows surged on doubts over Fed rate cuts

(Reuters) - U.S. equity funds saw a spike in outflows for the week ending Jan. 15, as the outlook for Federal Reserve rate cuts this year had dimmed while investors were cautious about the ongoing quarterly earnings season.

According to LSEG Lipper data, investors withdrew a sharp $8.23 billion from U.S. equity funds during the week on top of a net $5.01 billion worth of sales in the prior week.

U.S. shares rose after a lower-than-expected core inflation reading and strong financial results from firms like JP Morgan and Goldman Sachs, but concerns linger that President-elect Donald Trump's potential tariffs on Mexico, Canada, and increased tariffs on China could drive inflation higher and impede long-term growth.

By segment, investors divested large-cap, mid-cap, multi-cap and small-cap funds to the tune of $4.35 billion, $1.54 billion, $1.02 billion and $379 million, respectively.

Sectoral funds witnessed $428 million worth of outflows following a net $35 million of purchases a week ago. Still, the financial sector was in demand with about $752 million in net investments during the week.

U.S. bond funds, meanwhile, drew inflows for the second week in five, to the tune of $6.18 billion on a net basis.

U.S. general domestic taxable fixed income funds, short-to-intermediate government and treasury funds, and loan participation funds witnessed a notable $2.33 billion, $2.15 billion and $1.42 billion worth of inflows, respectively.

In parallel, investors divested a net $60.07 billion worth of money market funds, ending a three-week-long trend of net purchases.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Mrigank Dhaniwala)

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