Record Inflows into Stocks and Bonds
Stocks continued to attract the largest net inflows, totaling $85.3 billion in August. Meanwhile, net inflows into bonds decreased to $41.5 billion, still making August the third best month for bonds so far this year.
“Despite the lower activity in bonds, we still see strong interest from investors, especially in short durations and investment-grade credits,” says Karim Chedid, Chief Investment Strategist for iShares EMEA at Blackrock.
Tech Sector Leads Inflows
Sector flows in August followed previous patterns with the tech sector leading the way. Tech stocks attracted an additional $10.6 billion, bringing the total net inflow for the year to over $40 billion. The financial sector was the second most popular with inflows of $3.1 billion during the month, while utilities saw an increase of $0.8 billion.
“Tech stocks continue to dominate investor interest, but we also see interest in interest-sensitive sectors like utilities benefiting from expected easing from central banks,” says Chedid.
Net inflows into the financial sector have increased by a total of $7.4 billion over the past three months, mainly focused on US financial stocks. In Europe, net inflows evened out as net outflows in August offset inflows in June and July.
Market Volatility Drives Inflows to Defensive Sectors
Utilities are likely to benefit from increasing allocations from investors seeking defensive options in a volatile environment.
The increased market volatility in early August also resulted in the second largest net inflow week for utilities this year, with net inflows of $0.8 billion. The majority of these flows have been directed towards US utilities, although smaller amounts have also been allocated to global and European companies.
Strong Inflows into US Stocks and Emerging Markets
Despite a slight decrease in stock flows from the high levels in July, investor interest in US stocks remained strong, with $48.4 billion in net inflows in August. Emerging market stocks also saw continued positive net inflows of $22 billion, while European stocks attracted $1.5 billion.
Bonds and Investment Grade Remain Safe Options
In the bond market, flows remained stable with $18.6 billion in net inflows in August. This was in line with July levels.
Multi-sector flows increased to $11.5 billion, with investment-grade credits attracting $8 billion. However, emerging market bonds and high-yield credits decreased, reflecting the broader investor reluctance to take on greater risks in bonds in 2024.
In Europe, short durations continued to dominate bond flows with $0.7 billion.