US Investors Pile into Money Market Funds Amid Slowdown Concerns

In the week ending August 7, U.S. investors significantly increased their holdings in money market funds, signaling a retreat from riskier assets in response to a stock market downturn driven by economic slowdown fears.
According to LSEG data, a staggering $47.48 billion flowed into U.S. money market funds, marking the largest weekly inflow since April 3. At the same time, investors sold off $7.39 billion in equities, ending a three-week streak of buying.
The shift comes in the wake of a weaker-than-expected U.S. payrolls report and disappointing manufacturing data, which have heightened concerns about the health of the economy and contributed to the recent stock market sell-off. Small-cap funds, in particular, saw a $2.42 billion withdrawal, breaking a three-week trend of net purchases. Mid-cap and multi-cap funds also experienced outflows of $400 million and $382 million, respectively, though large-cap funds managed to attract $1.68 billion in net purchases.
Sector-wise, financials saw a notable outflow of $1.36 billion as investors turned net sellers after three weeks of buying. The technology and communication services sectors also faced significant outflows, with $657 million and $521 million exiting, respectively.
Additionally, demand for U.S. bond funds diminished, receiving only $452 million—the smallest inflow in ten weeks. Loan participation funds experienced a sharp decline, with $3.07 billion in net sales, the highest weekly outflow since October 2020. In contrast, short/intermediate investment-grade and municipal debt funds saw inflows of $1.31 billion and $674 million, respectively.
This shift highlights investor caution in the face of economic uncertainties, with a pronounced move towards safer investments in money market funds and a strategic reallocation away from equities and riskier assets.