Tech Funds See Record $9.3B Outflows as Investors Retreat From U.S. Stocks

TLDR

• Tech funds suffered record outflows of $9.3 billion last week, the largest ever recorded, according to Deutsche Bank.
• Global equity fund inflows dropped 86%, from $55.5 billion to $7.5 billion week-over-week per LSEG Lipper data.
• U.S. equity funds saw $8.5 billion in outflows while global funds attracted $14.4 billion, pointing to a rotation out of U.S. markets.
• May PCE inflation came in at 4.1%, its highest since April 2023, raising the prospect of a Fed rate hike later this year.
• Tech sector funds posted $17.83 billion in weekly net outflows, broadly reversing the prior week’s $21.5 billion inflows.

Investors pulled money from technology funds at a record pace last week, while inflation data raised the chance of another Federal Reserve rate hike.

Tech Funds See Biggest Outflow on Record

Technology sector funds posted $17.83 billion in net outflows for the week ending June 24, reversing almost all of the $21.5 billion that flowed in the week before.

Deutsche Bank strategists, in a note by analyst Parag Thatte, reported record tech fund outflows of $9.3 billion. The bank said mega-cap growth and technology positioning has slipped to slightly below neutral.

Discretionary investor positioning has fallen to modestly underweight. Systematic strategies remain modestly overweight, though volatility control funds stayed at moderate levels.

Overall, global equity fund inflows dropped sharply to $7.51 billion. That is down roughly 86% from $55.53 billion the prior week, according to LSEG Lipper data.

U.S.-focused equity funds accounted for most of the selling, with $8.5 billion in outflows. Broad global funds ran against the trend, pulling in $14.4 billion in inflows.

Financial and industrial sector funds also saw net outflows of $750 million and $1.04 billion respectively.

Inflation Data Adds Pressure

Investor sentiment took a hit from fresh inflation data. The Commerce Department reported May PCE inflation at 4.1%, the highest reading since April 2023.

That number has reinforced expectations of a possible 25 basis point Fed rate hike later this year. Higher rates tend to weigh on growth-oriented stocks, including large technology companies.

Concerns about debt-funded tech spending also grew during the week. SpaceX joined other large tech names in tapping bond markets, drawing attention to how much of the sector’s investment boom relies on borrowing.

European and Asian equity funds saw reduced but positive inflows of $6.28 billion and $2.95 billion respectively, down from $11.71 billion and $3.82 billion the prior week.

Investors bought $10.85 billion in bond funds, extending a 12-week consecutive buying streak. Hard-currency bond funds, short-term bond funds, and dollar-denominated medium-term bond funds all attracted inflows.

Money market funds saw $42.8 billion in outflows, the largest single-week withdrawal since April 15.

Gold and precious metal funds posted a sixth straight week of outflows, with $545 million in net sales. Energy funds shed $81.9 million after two weeks of inflows.

Emerging market equity funds saw their ninth straight week of net outflows, totaling $3.39 billion. Emerging market bond funds attracted $132 million, their first inflow in three weeks.

The data collectively points to investors trimming U.S. technology exposure and moving toward diversified international allocations amid caution around valuations and monetary policy.

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