Global Equity Funds Extend Inflows to 11th Week as Earnings Drive Sentiment

Global equity funds recorded inflows for an 11th consecutive week, as optimism about a robust earnings season and cooling crude oil prices significantly boosted investors' appetite for risk assets. According to LSEG Lipper data, investors poured a net $21.15 billion into global equity funds for the week ending August 5, following roughly $27.72 billion in net purchases the previous week. This positive market sentiment is underpinned by Amazon reporting its strongest cloud growth in over four years, alongside strong results from Caterpillar, a widely viewed bellwether for the global industrial economy, and Palantir Technologies.

Earnings Momentum Fuels Risk Appetite

Figures clearly demonstrate that the current earnings season is far exceeding expectations. Data from approximately 808 MSCI World constituent companies that have reported so far reveal that their combined profits for the latest quarter rose 40.9% from a year earlier. Notably, about 75% of these companies beat analysts' forecasts, injecting substantial confidence into the market.

■Amazon's momentum in the cloud segment proves that recovery is spreading beyond just the technology sector.

■Industrial giant Caterpillar's performance signals that global economic activity remains resilient.

■Strong earnings from data-centric firms like Palantir confirm sustained demand for AI and analytics.

Capital Flight from US Markets Amid Regional Divergence

A notable regional divergence is taking shape. European equity funds attracted $12.52 billion—marking the largest weekly inflow since July 8—while Asian funds recorded $8.15 billion in inflows. However, US funds bucked this trend, experiencing approximately $1.58 billion in outflows. This indicates that global capital is seeking value and growth potential outside of US markets.

Sector Rotation Accelerates as Tech Inflows Ease

A significant shift is occurring in sectoral fund allocations. Inflows into technology funds eased to a six-week low of $1.44 billion, as investors rotated their focus toward industrial and consumer-oriented funds.

■Industrial funds saw net purchases of $1.08 billion.

■Consumer discretionary and healthcare sector funds recorded inflows of $710 million and $653 million, respectively.

■High-yield bond funds attracted the largest weekly inflow in five weeks, totaling $3.66 billion.

■Money market funds attracted net inflows of $57.48 billion, ending a three-week run of net outflows.

In emerging markets, equity funds gained momentum, with weekly inflows climbing to a more than five-month high of $9.26 billion.

This 11-week streak of inflows signals a fine line between "Fear of Missing Out" (FOMO) and rational risk management. The outflows from US funds suggest that volatility (VIX) expectations in the options market are diverging regionally. Specifically, the pivot toward industrial equities confirms that macroeconomic data is suppressing recession fears. However, the massive interest in money market funds implies that institutional investors have not fully exited their cash preservation mode, which could act as a buffer against any potential Gamma Squeeze risks at any moment.