The “Wall of Worry” has returned.
According to LSEG Lipper data, US equity funds saw $26 billion in net outflows for the week ending Jan 7, marking the first weekly withdrawal since mid-December.
🌪️ THE DRIVERS: Investors are taking chips off the table ahead of a trifecta of risks:
- Supreme Court Ruling: The pending decision on the legality of President Trump’s sweeping tariffs.
- Fed Policy: A mixed jobs report (slower growth, but 4.4% unemployment) cementing expectations for a rate pause.
- Geopolitics: Deepening global tensions forcing a flight to safety.
💸 THE FLOW BREAKDOWN:
- Large-Cap Exodus: -$31.75 billion (The heaviest selling since Sept 2025).
- Small/Mid-Cap: Combined outflows of ~$4.7 billion.
- Sector Divergence: interestingly, while selling the index, investors added$5.32 billion into specific sectors:
- 🏗️ Industrials: +$1.69B
- 💻 Tech: +$1.32B
- 🏦 Financials: +$1.3B
🛡️ THE FLIGHT TO SAFETY: Where did the capital go?
- Cash: Money Market funds absorbed $53.35 billion (2nd straight week of inflows).
- Bonds: Fixed income funds attracted $9.27 billion, with demand for Short-Term Investment Grade hitting a 6-month high (+$4.12B).
💡 ANALYST TAKEAWAY: This is a classic “de-risking” event, not a panic. The massive $31B exit from Large-Caps suggests investors are locking in gains from the index leaders and moving to the sidelines (Cash) or quality yield (IG Bonds) until the Supreme Court clarifies the tariff landscape. The fact that Industrials saw inflows suggests some are still positioning for a domestic capex boom despite the macro noise.
👇 Allocators: With Money Markets offering safety and Equities facing tariff uncertainty, are you raising cash levels for Q1?