Investor sentiment proved resilient despite rising trade tensions. In the week ending February 26, 2025, global equity funds drew a substantial $28.3 billion in net inflows—the highest weekly total since late December 2024. U.S. equity funds accounted for the bulk of this surge with $19.71 billion, followed by $4.33 billion into European funds and $3.25 billion into Asian funds.
Markets shrugged off President Trump’s announcement of import tariffs—25% on Mexican and Canadian goods, and an additional 10% on Chinese imports—to focus instead on looming interest rate cuts driven by weaker economic data. UBS Global Wealth’s CIO Mark Haefele emphasized a preference for U.S. equities and high-quality fixed income amid this backdrop.
Sector Allocation Deep Dive
Thanks to EPFR’s granular data, the following sector-level insights are available:
Key Sector Movements:
Consumer Goods, Telecom, and Healthcare/Biotech sector funds each received over $700 million in net inflows—the latter reaching an 81-week high. Utilities funds also recorded fresh inflows, while the remaining sectors collectively saw net outflows averaging $200 million. Aerospace & Defense within Industrials secured its largest inflow in nearly four months, extending an eight-week streak of positive flows.
Relevant Context from Surrounding Periods:
In the week ending Feb. 19, Financials, Infrastructure, and Telecoms sectors maintained inflow streaks; Industrials, Commodities, and Utilities also shifted into positive territory. Technology remained under pressure, posting its third straight outflow, though those with SRI/ESG mandates bucked the trend.
ETF Insights: February Snapshot
ETF flow data for February reinforces sector trends:
Equity ETFs saw net inflows of $65.7 billion, predominantly into U.S. equity (+$50.7 billion), followed by Developed Markets International (+$9.6 billion), Emerging Markets (+$4.4 billion), and Global Equity (+$1.0 billion). Sector-level ETF flows showed Thematic and Communication Services funds posted gains of $1.5 billion and $1.0 billion, respectively. In contrast, Information Technology suffered the largest outflow, losing $1.8 billion, while Industrials saw $0.8 billion in net redemptions. Factor-based equity ETFs favored Value (+$6.3 billion) over Growth (+$2.2 billion), with strong interest also seen in Dividend and Quality plays.
The Bottom Line
The week ending February 26, 2025, marked a remarkable capture of investor confidence. Equity fund inflows surged to multi-week highs, propelled by expectations of upcoming rate cuts despite alarming tariff announcements.
Sector preferences reveal a clear defensive tilt and prudent diversification: Consumer Goods, Telecom, Healthcare/Biotech, Utilities, and Aerospace & Defense stood out as key beneficiaries. Financials, Infrastructure, and Telecoms continued to attract capital in the preceding days. Technology remained under pressure, particularly in conventional funds—but fared better within SRI/ESG formats.
Meanwhile, ETFs mirrored these flows: value, dividends, and quality sectors outperformed, while technology faced net outflows.
This article is for informational purposes only and does not constitute financial advice.
