Key Highlights

  • US Equity funds recorded net outflows of $11.12 billion in the week through September 2, following $22.72 billion in outflows the previous week.
  • Bond yields and oil prices surged earlier in the week after the US struck Iranian military targets near the Strait of Hormuz, with Tehran saying it targeted US Assets across the region.
  • Strong results from Nvidia and Dell Technologies helped limit the broader selloff, signaling the AI spending boom remains intact.
  • Money market funds attracted nearly $48.76 billion, their highest weekly intake in four weeks, as investors sought safety.

A Second Consecutive Week of Withdrawals

US equity funds recorded outflows for a second consecutive week, as rising bond yields and oil prices amid renewed Middle East tensions weighed on investor sentiment, though strong results from AI-related companies helped limit the broader selloff. Investors withdrew a net $11.12 billion from US equity funds in the week through September 2, compared with $22.72 billion in net outflows the previous week, according to LSEG Lipper data.

Bond yields and oil prices surged earlier in the week as the US struck Iranian military targets near the Strait of Hormuz, while Tehran said it had targeted US assets across the region. Strong results from Nvidia and Dell Technologies, however, signaled that the AI spending boom and related market trade remain intact.

Large-Cap Funds Bear the Brunt

US large-cap equity funds recorded net outflows of $7.52 billion, easing from $24.73 billion in net sales the previous week. Mid-cap funds saw outflows of $572 million, while small-cap funds recorded outflows of $1.83 billion.

Sectoral funds reported net selling of $3.48 billion for the week, led by technology, financials and industrials. Technology funds recorded net withdrawals of $1.39 billion, followed by $1.31 billion in financials and $620 million in industrials.

Bond Funds and Cash Alternatives See Continued Demand

US bond fund inflows fell to a five-week low of $4.27 billion during the week, though short-to-intermediate government and Treasury funds remained popular, attracting $4.53 billion. Short-to-intermediate investment-grade funds and Loan participation funds also drew significant inflows of $1.53 billion and $990 million, respectively.

Money market funds attracted nearly $48.76 billion, marking their highest weekly intake in four weeks, as investors increasingly favored cash and short-duration instruments amid the uncertain geopolitical and interest-rate backdrop.

A Market Caught Between Conflicting Signals

The combination of geopolitical risk, rising yields and resilient AI-sector Earnings has created a mixed picture for equity investors, with broad market outflows continuing even as specific pockets of strength, particularly in AI infrastructure, keep sentiment from deteriorating further. Whether the pace of outflows continues to ease in the coming weeks will likely depend on how the Iran conflict evolves and how markets digest upcoming Inflation data ahead of the Federal Reserve's September meeting.