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Weekly Records Shows Huge Global Sales Of Equity Funds Amid Rate-Hike Fear

Investors across the globe sold huge amounts of equity funds at the end of August. This was revealed in the weekly data posted by Refinitiv Lipper. This may be caused by the announcement made by Jerome Powell, that there will be an increase in interest rates by banks despite the inflation.

Need For Increased Interest Rate

Jerome Powell, the chief of the Federal Reserve Board, says there will be a need for increased rates, to battle current inflation. He disclosed this in his opening speech, at the Jackson Hole central banking conference in Wyoming.

Powell explained that to reduce the high inflation rate, central banks will hike the interest rate and it will remain high till inflation reduces. It added that it will sadly affect businesses and households.

Further, he explained that persistent inflation will cause greater pain in the long run. He also emphasized the importance of restoring stable prices in the economy.

Investors Offload Equity Funds

Following the announcement of the fast-approaching increase in interest rates, investors across the globe offloaded their equity funds. This, according to data provided by Refinitiv Lipper, is the highest since June 15.

Meanwhile, the monetary data gathered from the United States indicated a rise in Job vacancies in July. Monetary data across euro zones, however, shows that inflation hit its peak in this region in August.

Similarly, $12.64B of United States equity was offloaded, while European equity also recorded a disposal worth $10B. In Asia however, investors acquired $1.51B worth of equity funds.

In the Healthcare sector, $546M worth of funds were withdrawn. Investors similarly withdraw $700M worth of funds from the Tech sector. But $792M of funds was pumped into the financial sector.

Bond funds were not left out as they reported $8.04M in outflows. There was also an outflow last week. Short and medium-term bonds also recorded an outflow of $2.49B, and high-yield bonds experienced an outflow worth $5.44B.

In the money market, investors also disposed of $1.34B worth of funds. This outflow is happening in the fourth week consecutively. Government-linked funds, however, recorded an inflow of $1.3B Inflation-linked funds also raked in $162M.

In the commodity sector, precious metals funds documented an outflow worth $890M. This is the highest in six weeks. An outflow of $118M was recorded for Energy funds also.

Finally, the data shows that 24,482 emerging market funds’ analysis revealed a $933M outflow for bonds, while equity recorded a $738M outflow.

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