Investors pulled a net $50.2 billion from U.S. equity funds in the week ending December 18, according to LSEG Lipper data, the biggest net outflow since September 2009, as they cashed in profits from a market rally ahead of the Fed policy decision.
The Fed cut rates as expected on Wednesday but projected fewer-than-expected interest rate cuts and higher inflation next year, while Chair Jerome Powell explicitly referred to a need for caution, prompting a sell-off in equity markets.
Investors withdrew a hefty $20.93 billion from U.S. large-cap funds, halting a six-week-long streak of net purchases. They also shed small-cap, multi-cap, and mid-cap funds to the tune of $5.41 billion, $3.91 billion, and $2.85 billion, respectively.
U.S. sectoral funds recorded net sales for the third consecutive week, totaling $1.53 billion, with the tech and healthcare sectors leading the outflows at $1.32 billion and $324 million, respectively. Meanwhile, the financial sector attracted $578 million in net purchases during the same period.
For the first time in 29 weeks, U.S. debt funds experienced a drop in demand, with investors withdrawing a net $2.1 billion. Specifically, U.S. government bond funds faced the largest weekly outflow since October 2, amounting to $2.23 billion. General domestic taxable fixed income and loan participation funds received inflows of $2.08 billion and $1.01 billion, respectively.
U.S. money market funds witnessed a fourth weekly outflow in five weeks, to the tune of $28.07 billion.
