Investors Reduce Risk Exposure
U.S. equity funds experienced net outflows of $5.26 billion for the week ending January 21, 2026, as investors cut back on risk due to geopolitical worries. The move partially reversed the previous week’s net purchases of $28.17 billion.
Concerns were driven by President Donald Trump’s tariff threats against European nations over Greenland. However, Trump later stepped back from these threats and ruled out any forceful acquisition of Greenland.
Equity Fund Outflows Across Market Caps
Outflows were observed across large-cap, mid-cap, and small-cap funds:
- Large-cap funds: $12.94 billion net outflow
- Small-cap funds: $2.1 billion net outflow
- Mid-cap funds: $1.21 billion net outflow
Despite these outflows, sector-specific funds saw inflows totaling $3.3 billion, led by:
- Financials: $1.5 billion
- Metals and mining: $904 million
- Healthcare: $615 million
This indicates that investors are still selectively investing in sectors perceived as resilient during uncertain times.
Bond Funds See Modest Gains
U.S. bond funds attracted $5.9 billion, marking a three-week low. Within this category, short-to-intermediate investment-grade funds saw stronger demand, drawing $3.05 billion, up 44% from the prior week’s $2.11 billion.
Other popular bond categories included:
- General domestic taxable funds: $1.1 billion
- Municipal debt funds: $994 million
- Short-to-intermediate government and Treasury funds: $827 million
These inflows suggest that investors are seeking safer, fixed-income options amid equity market uncertainty.
Money Market Funds Face Outflows
Money market funds experienced a second consecutive week of outflows, with investors withdrawing $34.93 billion. This trend reflects a shift from ultra-liquid, low-risk holdings to targeted investments in specific equity and bond sectors.
Conclusion
U.S. investors are navigating a complex market landscape influenced by geopolitical uncertainty and shifting policy signals. While broad equity funds saw significant outflows, sector-specific equity and bond funds continued to attract capital. These movements highlight cautious investor behavior and a focus on balancing risk and return in volatile markets.
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