U.S. equity funds recorded their first weekly outflow in two weeks after investors withdrew $3.53 billion in the week ended June 24, as concerns over heavy spending by technology companies and the possibility of higher interest rates weighed on market sentiment.
The latest LSEG Lipper data showed the withdrawals partly reversed the previous week’s $37.63 billion in inflows. Technology funds accounted for the biggest losses, with investors pulling nearly $20 billion after adding $21.46 billion a week earlier.
IMG TXT: U.S. Investors Pull $3.5 Billion From Equity Funds. Source: Reuters
Investors have become more cautious as some of the biggest technology companies continue raising debt to fund artificial intelligence projects.
SpaceX recently joined other major firms in issuing bonds, adding to concerns that the AI investment race is becoming increasingly expensive. Expectations that the U.S. Federal Reserve could raise interest rates by another 25 basis points this year also reduced demand for riskier assets.
Higher rates often pressure crypto markets
Rising interest rates have historically affected both technology stocks and cryptocurrencies because they reduce the appeal of higher-risk investments. When borrowing becomes more expensive and safer assets offer better returns, investors often move money away from growth sectors.
That pattern has appeared several times over the past few years. During the Federal Reserve’s rate increases in 2022, both technology shares and Bitcoin fell sharply as investors reduced exposure to risk. While crypto and technology stocks do not always move together, they often react in similar ways when interest rate expectations change. This week’s withdrawals suggest many investors are again becoming more careful with where they place their money.
Will bond funds remain in demand despite weaker equity markets?
While equity funds lost assets, U.S. bond funds still attracted $7.33 billion during the week, although that was the smallest weekly inflow in eight weeks.
Short-to-intermediate investment-grade bond funds received $2.95 billion, while general domestic taxable fixed-income funds attracted $2.03 billion. Municipal bond funds added another $633 million. Money market funds, however, recorded net outflows of $25.74 billion, their biggest weekly withdrawal since April.
For the crypto market, weaker demand for technology stocks could continue to influence sentiment in the short term. Many institutional investors now hold both technology and digital asset investments, meaning caution in one market can quickly spill over into the other as they reduce exposure to higher-risk assets.
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