With October behind us, we conducted a deeper dive into fund flows over the month. Flows measure the net movement of cash into and out of investment vehicles, such as mutual funds and exchange-traded funds (ETF). We analyzed flows to gain insight into investor demand and sentiment surrounding asset classes, sectors, and other classifications of markets.

Morningstar Category Flows

When looking at Morningstar category data in October, large blend equities experienced the largest inflow at $21.1 billion. This continues a trend we’ve seen throughout the year, as the large blend category is the top category in terms of flow

U.S. stocks pulled back this week as post-election momentum lost steam, paired with falling rate cut odds after hawkish remarks from Federal Reserve (Fed) Chair Jerome Powell. On the macro side, key inflation data arrived broadly in-line with estimates. International stocks ended lower, with Asian markets continuing to struggle amid fragile sentiment as investors await additional stimulus measures from China while assessing the make-up of the incoming U.S. administration. Treasury yields continued to rise as well as the U.S. dollar, however oil and gold prices printed a weekly decline.

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As the Election Day dust settles, the U.S. Dollar Index has found itself at fresh year-to-date highs. The post-election rally of around 3% has been underpinned by rising yields, a byproduct of an improving domestic growth outlook and rising inflation expectations. This backdrop has the market recalibrating the potential depth of Federal Reserve (Fed) rate cuts over the next year. Fed funds futures are pricing in only three 0.25% cuts by the end of next year, including about a 75% chance of a rate cut next month. The Fed has penciled in five cuts by December 2025, but noted last week at their Federal Open Market Committee (FOMC) meeting inflat

Key Talking Points 

• Reported this morning, October inflation rose 0.2% from a month ago, the same monthly pace as July, August, and September as inflation is finding its balance.

• Despite the fairly steady monthly pace of inflation, the annual rate rose to 2.6% and is attributed to abnormal and large declines in gas prices back in October 2023. It does not appear to be signaling a new trend but rather base effects.  

• The sticky components of inflation continue to ease, giving the Fed some leeway to cut rates next month, but they could pause in January. The strength of s