Global equity fund investments contracted markedly during the week through January 21, with geopolitical tensions playing a pivotal role in tempering investor enthusiasm. In particular, the threat of renewed trade disputes initiated by U.S. President Donald Trump, especially concerning Europe and the contested issue surrounding Greenland, contributed to a cautious investment climate.
Data compiled by LSEG disclosed that, over the same period, investors contributed a net $9.19 billion to global equity funds, signifying a sharp decrease from the net $45.57 billion injected the preceding week. Early in the week, President Trump issued warnings about imposing tariffs on several European nations and expressed a controversial stance on Greenland; however, these threats were later withdrawn, diminishing the immediate risk perception.
Breaking down regional flows, U.S. equity funds experienced a net outflow of $5.26 billion, reversing part of the $28.17 billion inflow recorded in the week before, signaling some hesitance within the American markets. Conversely, European and Asian equity funds attracted net investments of $10.22 billion and $3.89 billion, respectively, suggesting differentiated regional investor confidence levels.
Addressing broader portfolio strategy, Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, emphasized the need for diversification across geographies and asset classes amid an increasingly polarized global landscape, cautioning investors regarding elevated risks and unpredictability.
Regarding earnings outlook, the initial phase of the fourth-quarter reporting season indicates expectations of a 16.44% earnings growth for global large- and mid-cap companies, which provides a positive backdrop despite the prevailing uncertainty.
From a sector perspective, funds centered on financials and metals and mining attracted significant inflows, registering net additions of approximately $2.36 billion and $2 billion, respectively. This pattern reflects targeted investor interest in sectors potentially benefiting from macroeconomic dynamics and commodity movements.
Meanwhile, fixed income assets remained favored, as bond funds saw net inflows totaling $12.52 billion, marking their third consecutive week of gains. This enthusiasm extended across currencies, with dollar-denominated medium-term bond funds acquiring net $2.14 billion and euro-denominated bond funds attracting about $1.6 billion.
In contrast, money market funds suffered a notable net withdrawal amounting to $35.02 billion for the second week running, which may reflect investor repositioning amid evolving risk assessments.
The gold and precious metals commodity funds segment maintained a strong investment streak, accumulating net inflows of $1.96 billion during the week, representing the tenth inflow in eleven weeks. This sustained interest underscores the role of precious metals as a hedge in uncertain environments.
Emerging markets equity funds experienced robust demand, drawing net inflows totaling $7.6 billion - the highest weekly level since October 2024. Moreover, bond funds focused on emerging markets secured an additional $1.42 billion, indicative of substantial confidence in growth prospects, albeit nuanced by global geopolitical risks.