U.S. equity funds posted their second weekly outflow in the past nine weeks through May 20, as investors moved to capture gains following the market’s recent rally amid renewed concerns over inflation pressures and rising long-term interest rates.
Data from LSEG Lipper showed investors withdrew a net $12.05 billion from U.S. equity funds during the week, marking the largest weekly outflow since mid-March, when equity funds experienced $24.52 billion in net redemptions.
Investor sentiment was pressured by a sharp rise in Treasury yields, with the 30-year U.S. Treasury yield climbing to 5.201% on Wednesday — its highest level since 2007. The move renewed concerns around the potential impact of elevated borrowing costs on economic growth, equity valuations, and corporate profitability, particularly across rate-sensitive sectors.
Flows reflected a broad-based reduction in equity exposure across market capitalizations. Large-cap funds led outflows with net redemptions of $7.18 billion, while mid-cap and small-cap strategies saw outflows of $1.86 billion and $555 million, respectively.
Despite broader equity fund weakness, technology sector funds continued to attract investor interest, recording a seventh consecutive week of inflows totaling $2.57 billion. The sustained demand suggests investors remain constructive on long-term secular growth themes tied to artificial intelligence, cloud infrastructure, and digital transformation. In contrast, industrial and financial sector funds experienced net outflows of $1.45 billion and $1.32 billion, respectively, as higher rates and slowing growth expectations weighed on cyclical positioning.
Fixed income markets continued to attract capital as investors sought income opportunities and portfolio stability in a higher-rate environment. U.S. bond funds recorded net inflows of $12.5 billion for the week, broadly consistent with the prior week’s $12.83 billion in net purchases.
Within fixed income, investor demand was concentrated in shorter-duration and higher-quality segments of the market. Short-to-intermediate investment-grade bond funds attracted $4.63 billion in net inflows, while short-to-intermediate government and Treasury funds added $4.43 billion. Municipal bond funds also saw healthy demand, gathering $1.53 billion during the week as investors continued to prioritize tax-efficient income solutions.
Money market funds likewise experienced renewed inflows, with investors allocating a net $12.04 billion to U.S. money market strategies after the category recorded $4.19 billion in outflows the previous week. The reversal highlights continued investor preference for liquidity, capital preservation, and attractive short-term yields amid elevated market uncertainty and rate volatility.
For wealth advisors and RIAs, the latest fund flow data underscores the ongoing tension between resilient risk appetite and heightened macroeconomic caution. While clients continue to maintain selective exposure to long-term growth themes — particularly within technology — elevated Treasury yields and inflation concerns are driving a more defensive posture across broader equity allocations.
At the same time, persistent inflows into investment-grade fixed income, Treasuries, municipals, and money market funds suggest many investors are increasingly focused on income generation, downside mitigation, and liquidity management as they reassess portfolio positioning in a higher-for-longer rate environment.
