Global Navigator | Investors reprice risk as monetary tightening returns

In the wake of the Federal Reserve’s first interest rate hike since 2023 and almost a year on the nose since the first rate cut of 2025, benchmark US equity indexes quickly dipped then recovered and yields on 10-year treasuries surged to their highest level since 2007 before easing. Investors are now watching for the pace of future hikes.

Overall, the week ending September 24 saw EPFR-tracked Equity Funds pull in a 13-week high inflow of nearly $80 billion that likely reflects the influence of the third ‘triple witching’ date of the year while investors committed the smallest total to Bond Funds since mid-April at $9.75 billion. Strong flows into Physical Gold Funds offset redemptions from both Cryptocurrency and WTI Crude Oil Funds, guiding all Alternative Funds to post an inflow of $3.8 billion during the latest week. Money Market Funds, meanwhile, snapped their three-week run of inflows, pulling their year-to-date total down by $75.9 billion.

Of the flows redeemed from Money Market Funds, over 80% was directed by US Money Market Funds which saw their YTD total fall to $322 billion. Despite redemptions in the past week, monthly data in August shows a modest collective inflow for all Money Market Funds that largely offset the $74 billion in net redemptions they experienced during July. For those who see Money Market Funds as safe ports in market and geopolitical storms whose longer-term fortunes wax and wane with short-term yields on highly rated assets, there is good reason for investors to keep the more than $4.5 trillion they have committed to these funds since 2020 where it is. But their appetite for adding to their holdings has waned since mid-2Q26, with relative flows markedly smaller than was the case in previous years when average returns were at current levels.