Global equity funds draw strongest weekly inflows since July on AI optimism

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Global equity funds AI inflows

Highlights

Global equity funds attract $44.1 billion in the week to September 25, the largest net inflow since July 8, led by technology and U.S. equities.
U.S. equity funds see $37.6 billion in inflows as AI optimism boosts sectoral tech funds to $5.29 billion, the highest since July 29, while Goldman Sachs ties nearly half of S&P 500 EPS growth to AI investment.
Despite a 30-year U.S. Treasury yield jump to a 22-year high of 5.5016%, global bond funds post $9.68 billion in inflows, with investors favoring short-term, loan-participation, and precious metals funds.

Fund flow rebound led by technology and U.S. equities

As reported by Reuters, citing LSEG Lipper, investors buy a net $44.1 billion of global equity funds in the week to September 25, marking the largest weekly net purchase since July 8.

Technology-sector demand is supported by strong consumer uptake of Meta's Muse agent, which tops U.S. app download rankings. Record South Korean exports in the first 20 days of September, driven by rising semiconductor shipments, also reinforce optimism around chip demand.

Goldman Sachs strategists say this week that AI investment is driving almost half of S&P 500 earnings-per-share growth this year. U.S. equity fund inflows surge to a three-month high of $37.6 billion during the week, while European and Asian equity funds record net purchases of $2.26 billion and $2.21 billion, respectively.

Among sectoral funds, technology funds attract $5.29 billion, the largest weekly net inflow since July 29. Healthcare funds add $804 million and consumer discretionary funds take in $492 million.

Bond yield pressure fails to derail broader risk demand

The return of equity inflows comes even as a selloff in government debt pushes borrowing costs sharply higher. The 30-year U.S. Treasury yield climbs to a 22-year high of 5.5016% on Thursday as stronger economic data and expectations of further Federal Reserve tightening lead investors to reassess the interest-rate outlook.

Global bond funds record net weekly inflows of $9.68 billion after a marginal outflow of $73.58 million in the previous week. Short-term bond funds and loan-participation funds post notable inflows of $2.5 billion and $1.4 billion, while government bond funds register net outflows of $1.47 billion, ending a two-week streak of inflows.

Investors continue to pull money from money market funds for a second straight week, with net sales totaling $605 million. In commodities, gold and other precious metals funds attract $885.6 million for their 10th weekly inflow in the past 11 weeks, and energy funds record net purchases of $89.26 million.

In emerging markets, bond funds take in $548.99 million, reversing net sales of $158.22 million in the previous week. Equity funds also post a marginal weekly inflow of $29.3 million after two consecutive weeks of outflows, based on data covering a combined 29,018 funds.

In our earlier coverage of the sharp surge in U.S. Treasury yields, we outlined how the sell-off pushed long-term borrowing costs to multi-year highs and spilled over into Asia and Europe. We also noted that while equities were holding up unevenly, elevated rates can raise stress risks across the economy, with potential pressure points ranging from housing and government financing to rate-sensitive sectors and leveraged areas of credit markets.

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