US Equity Funds Face Third Week of Outflows Amid Tariff Fears and Economic Uncertainty
Investors continue to retreat from US equities, with US equity funds recording net outflows of $15.56 billion for the week ending April 30, 2025—marking the third consecutive week of capital flight. This exodus reflects deepening concerns over the economic impact of tariffs, a weakening US GDP, and a broader shift toward safer assets.
The Tariff Effect and Economic Headwinds
The outflows are directly tied to escalating geopolitical tensions and the US economy’s fragility. The first-quarter GDP contraction of 0.3%—driven by a surge in imports as businesses raced to avoid impending tariff hikes—has amplified fears of a trade-driven slowdown. Investors are pricing in the risks of prolonged inflation, delayed Federal Reserve rate cuts, and the ripple effects of protectionist policies.
The $15.56 billion outflow for the week ending April 30 follows two prior weeks of redemptions, signaling a sustained loss of confidence. Meanwhile, European equity funds attracted $14.64 billion—their largest weekly inflow in over a year—as investors sought refuge in regions perceived as less exposed to trade conflicts.
Sectoral Shifts: From Tech to Bonds
The exodus from US equities has been uneven. Technology sector funds saw inflows, aligning with broader equity trends, but Financials Sector Funds posted their largest outflow in eight weeks due to uncertainty around interest rates and funding costs. Meanwhile, bond markets thrived:
- Global bond funds gained $4.73 billion, with high-yield bonds adding $3.58 billion.
- Short-term Treasuries and inverse ETFs also saw inflows, reflecting a “flight to safety” mindset.
In contrast, sectoral funds faced their fifth straight week of outflows, with gold and precious metals funds losing $759 million and metals/mining funds down $374 million. This highlights a broader skepticism toward commodity-linked assets amid trade volatility.
Emerging Markets: A Mixed Picture
While US equity funds struggled, emerging markets showed subtle resilience. India Equity Funds extended their record inflow streak, and China Equity Funds rebounded slightly in early May. However, Latin American and Global Emerging Markets (GEM) funds continued to see outflows, underscoring lingering geopolitical and economic risks.
The Fragile Optimism of May 1
The week ending May 1 brought a glimmer of hope, albeit a faint one. US equity funds recorded a minimal net inflow of $105 million, the first since late September 2023. However, this was overshadowed by broader market caution. Investors remained wary of stalled progress on inflation reduction, political divisions, and the Fed’s reluctance to cut rates.
Conclusion: A Turning Point or a Temporary Pause?
The three-week outflow trend underscores a pivotal shift in investor sentiment toward US equities. With the economy contracting and tariffs exacerbating uncertainty, capital is flowing toward perceived safer havens like European equities and bonds. The $15.56 billion outflow for the week ending April 30 reflects a stark reality: investors are no longer willing to bet on US markets without clearer signals on trade policies and Fed actions.
While the May 1 inflow hints at tentative optimism, it is too small to reverse the trend. Unless the US addresses tariff-related risks and demonstrates economic resilience, the outflows could persist. For now, the message is clear: in a world of geopolitical and macroeconomic uncertainty, US equities are losing their luster.
Final Note: The data paints a cautionary picture for US equity investors. With global markets now pricing in risks beyond trade—such as rising sovereign debt in Europe and China’s growth slowdown—the path to stability remains uncertain.