Commodities
U.S. equity funds shed $2.1 trillion in the quarter
The bear market set a record. From April to June, U.S. equity funds’ net assets fell 18.6%, or $2.1 trillion, the largest quarterly loss in history for them.
The bear market in U.S. stocks that began this year continues to break records both in the amount of investor funds evaporating and in the rate at which money is fleeing falling assets. The S&P 500 broad market index lost 16.45% in the second quarter, but assets of funds investing in U.S. stocks appeared to have declined even more.
As reported on Monday, citing data from Refinitiv Lipper Reuters, in the second quarter, there was a record reduction in their net assets – by $2.1 trillion – to $9.2 trillion. This, as the agency notes, is the maximum quarterly loss for such funds in history.
In relative terms, this corresponds to a drop of 18.6%, clearly more than the S&P 500. But although it is called a broad market index, the market itself is much broader, and the real structure of fund ownership and investment is different from any index. In addition to the serious drop in stock prices, the size of assets was also affected by investors taking money out.
According to Refinitiv Lipper, last week was the third week in a row that saw an outflow of money from U.S. equity funds. Generally speaking, there have been longer series of outflows this year. This is entirely unsurprising given that the entire first half of the year was also one of the darkest in history for U.S. stocks.
For the S&P 500, the first six months of 2022 were its worst since 1970, losing 20.6% during that period. For the Dow Jones Industrial Average, down 15.3%, it was its worst start to a year since 1962. For the younger Nasdaq Composite, which appeared only in 1971, it was the weakest first half of the year ever (minus 29.5%).
The Vanguard Total Stock Market Index Fund, Inst +, SPDR S&P 500 ETF Trust and Vanguard 500 Index Fund, Admiral showed the biggest declines in absolute terms in the second quarter. They lost $77.5 billion, $70.5 billion and $69.3 billion in net assets, respectively.
The rest of the Top 10 funds by falling assets are, of course, among the largest by absolute size and represent such giants as Fidelity, Vanguard, BlackRock and others. And the top 9 places are occupied by index-tracking funds.
Obviously, against the backdrop of a falling market, the ability to track its dynamics as accurately as possible no longer seems as good an idea to everyone as it used to be. This, however, is commonplace and not really related to the type of funds. Back in the 1980s and 90s, studies were conducted to show that the public was constantly hurting itself.
At that time managers were taking higher commissions than they do now, and these commissions were also higher than at index funds, which gained popularity in recent decades. So their yields were generally supposed to be lower, but they still did show it (and not so small). But in fact, in the long-term, the mass investor got just a small share of it.
The reason was in constant attempts to guess the right moment to buy or sell stocks or other instruments, and also to choose a fund which would be best suited for this. After many attempts people, firstly, just did not guess, and secondly, paid much higher commissions, additionally reducing profitability. As a result, a strategy like “buy and hold” turned out to be an order of magnitude more effective. Now the stock industry has changed noticeably.
Commodities
Oil set for weekly loss on surplus fears despite OPEC+ cut extensions
By Enes Tunagur
(Reuters) -Oil prices fell on Friday as analysts continued to forecast a supply surplus in 2025 despite the OPEC+ decision to postpone planned supply increases and extend deep output cuts to the end of 2026.
futures were down 66 cents, or 0.9%, to $71.43 per barrel at 1128 GMT. U.S. West Texas Intermediate crude futures were down 65 cents, or 1%, to $67.65 per barrel.
For the week, Brent was on track to fall 2%, while WTI was on course for a 0.5% drop.
The Organization of the Petroleum Exporting Countries and its allies on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.
The group, known as OPEC+ and responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially in China – and rising output elsewhere have forced it to postpone the plan several times.
“The outcome of the latest meeting of OPEC+ members surprised us positively … The extension of the production cuts shows the group remains united and is still targeting to keep the oil market in balance,” UBS analyst Giovanni Staunovo said.
Pressuring prices on Friday, analysts reiterated expectations of a supply surplus next year, although some of them now view a smaller surplus than before.
Bank of America forecasts increasing oil surpluses to drive Brent to average $65 a barrel in 2025, while expecting oil demand growth to rebound to 1 million barrels per day (bpd) next year, the bank said in a note on Friday.
HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.
Brent has largely stayed in a tight range of $70-75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.
“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.
Commodities
Oil pares some gains after source says OPEC+ to delay output hike
By Paul Carsten
LONDON (Reuters) -Oil prices pared some gains on Thursday after a source told Reuters OPEC+ has agreed to delay a planned oil output hike until April 2025.
was up 24 cents, or 0.3%, to $72.55 a barrel at 1237 GMT. It had been at $72.84 before Reuters reported the delay.
U.S. West Texas Intermediate (WTI) rose 25 cents, 0.4%, and was trading at $68.79 a barrel.
The planned delay comes as OPEC+, made up the Organization of the Petroleum Exporting Countries plus allies including Russia, tries to support prices as it wrestles with weak demand, notably from China, and rising supply outside the producer group.
“It will not make next year’s oil balance tight and supply surplus is still anticipated,” said Tamas Varga of oil broker PVM. “This view was mirrored in the gut price reaction.”
There remains the question of how long the delays could last, with this only the latest in a series. OPEC+ was originally due to begin raising output in October as part of a plan to gradually unwind the group’s most recent layer of output curbs of 2.2 million barrels per day.
“They reiterate that these barrels will indeed come back,” said Bjarne Schieldrop, chief commodities analyst at SEB. “It’s a limited time frame. This means there is no upside to the oil price in the next couple of years.”
Elsewhere, a larger-than-expected draw in stockpiles last week also provided some support to prices.
In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and its attacks would go deeper into Lebanon and target the state itself.
Meanwhile, Donald Trump’s Middle East envoy has travelled to Qatar and Israel to kick-start the U.S. President-elect’s diplomatic push to help reach a Gaza ceasefire and hostage release deal before he takes office on Jan. 20, a source briefed on the talks told Reuters.
Commodities
OPEC+ likely to extend oil output cuts to support market- report
On Thursday, OPEC+ is expected to postpone its planned increase in oil production, which was initially scheduled to commence in January, Reuters reported.
The decision to maintain current output levels aims to provide additional support for the oil market. The group, responsible for about half of the world’s oil supply, had intended to start easing output restrictions through 2025 but is now reconsidering in light of a global demand slowdown and increased production from non-member countries.
The consortium’s plan to unwind output cuts has faced challenges due to these market conditions, which have also exerted downward pressure on oil prices.
Accordingly, an extension of the current output cuts for an additional three months is the most probable outcome of the online meeting. However, there are indications that an even longer extension could be under consideration.
The deliberations within OPEC+ reflect the group’s ongoing efforts to balance oil supply with fluctuating global demand. The decision to delay the increase in output is seen as a measure to stabilize the market, which has been affected by various economic factors.
Market participants are closely monitoring the developments from OPEC+’s meeting, as the group’s decisions have significant implications for global oil supply and pricing. The final outcome of the meeting, including the length of the extension, will be determined by the consensus of the member countries.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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