Global Equity Funds Experience Major Outflows Amid Valuation Concerns

Global equity funds experienced their first weekly outflow in 10 weeks, losing $4.48 billion, as fears of tech sector overvaluation overshadowed optimism around upcoming U.S. interest rate cuts. Investors withdrew heavily from U.S. and European funds, while Asian funds saw marginal inflows. Bond and commodity funds remained popular, especially gold.

Global equity funds experienced a stark shift as they faced their first weekly outflow in a decade-long period, losing a net $4.48 billion. This downturn, noted in the week of November 26, was predominantly driven by investor anxiety over high valuations, particularly within the technology segment, overshadowing the anticipated cuts in U.S. interest rates slated for next month.

Investor activity varied significantly by region. U.S. and European equity funds saw withdrawals amounting to $4.56 billion and $1.21 billion, respectively. However, Asian equity funds managed to secure modest inflows of approximately $170.37 million. The overall market sentiment was marred by volatile conditions in November, which included fears of overvaluation in the tech sector and a historically prolonged 43-day U.S. government shutdown.

Asset management experts remain cautious. Vincenzo Vedda, CIO at DWS Group, suggested a selective approach towards AI, citing potential disappointment risks due to high valuations. Despite equity outflows, global bond funds continued to attract investor interest, although inflows fell to a 22-week low of $6.77 billion. Meanwhile, the popularity of commodity funds, especially gold, persisted, drawing $1.66 billion in inflows for a consecutive seven-week period.

(With inputs from agencies.)