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Investors navigate multiple currents

In a year of multiple – and often competing – economic narratives and themes, the second week of July offered something for everyone.

For the reflationary bulls, key equity indexes on both sides of the Atlantic hit fresh record highs as new US childcare tax credits started flowing, the Chinese government cut reserve requirements for domestic banks and the 2Q21 US corporate earnings season got off to a strong start. For inflation hawks, core US inflation in June hit its highest level since 1991. For those betting on a greener future, the European Union unveiled a sweeping plan, Fit for 55, that aims to eliminate petrol-driven vehicles and expand the use of carbon taxes. For those who believe that the Covid-19 pandemic remains the biggest story, infection rates driven by the Delta variant continued to climb.

Against this backdrop, flows to EPFR-tracked funds followed the stimulus trail while steering clear of groups where monetary tightening or the ongoing pandemic could have a bigger impact. China Equity Funds posted their first inflow since the second week of June and biggest since the second week of May, Infrastructure Sector Funds extended their longest inflow streak since 2014 and Europe Bond Funds enjoyed record-setting inflows during a week when the European Central Bank announced a new inflation targeting policy.

Overall, the week ending July 14 saw all Equity Funds post a collective net inflow of $18.7 billion versus $362 million for Alternative Funds, $2.5 billion for Balanced Funds, $5.6 billion for Bond Funds and an outflow of $30 billion for Money Market Funds.

 

 

 

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