U.S. Equity Funds See Sixth Consecutive Weekly Withdrawals

27 June 2025

REUTERS/Brendan McDermid

U.S. equity funds endured their sixth straight week of outflows through June 25, reflecting investors’ cautious stance amid elevated market valuations and anticipation ahead of key economic data. According to LSEG Lipper, net withdrawals totaled a hefty $20.48 billion, marking the most significant weekly sell-off since March.

While large-cap funds bucked the trend with $1.3 billion in net inflows, mid-, small-, and multi-cap segments saw outsized fund redemptions. Multi-cap funds lost $5.65 billion, with small-cap and mid-cap losing $2.34 billion and $1.39 billion, respectively.

This rotation follows a recent surge in the S&P 500 and Nasdaq to record highs, largely driven by AI-fueled optimism and renewed hopes for interest rate cuts. Investors appear to be locking in gains, deploying some of the proceeds into safer asset classes.

Money market funds drew fresh inflows of $10.95 billion amid the equity sell-off, marking a reversal after two weeks of outflows. Simultaneously, U.S. bond funds attracted $6.83 billion in net investments, the strongest weekly inflow in a month. Taxable bond categories, including short‑to‑intermediate investment grade and inflation-protected securities, led this trend with inflows of $1.18 billion and $680 million respectively.

The outflows underline a shift in investor priorities. Rather than moving to cash, many are reallocating into fixed income to protect gains and hedge against upcoming uncertainties especially upcoming consumer spending and inflation data. The Federal Reserve remains in focus, with markets behaving as though rate cuts may be more likely later this year if soft data continues .

The equity exodus also reflects concerns surrounding consumer pulse and corporate earnings. May’s unexpected drop in consumer spending and cool inflation increase helped temper investor expectations, shifting the narrative from growth optimism to cautious exposure . As attention turns to U.S. jobs data, earnings reports, and trade developments, investors seem to be calibrating exposure maintaining positions in large-cap tech while reducing stakes in more cyclical small- and midcaps.

In summary, the week saw a pronounced shift from risk assets to safer allocations. Equity yields are being cashed in, bonds are in favor, and the spotlight is on macroeconomic catalysts particularly inflation and interest rate trajectory to determine the next market direction.