Global equity funds recorded their largest weekly outflow in nine months during the week through September 18, with investors withdrawing a net $23.21 billion from global equity funds, according to LSEG Lipper data. This represents the biggest weekly outflow since December 17, 2025, driven by a surge in oil prices to four-month highs that stoked inflation concerns and pushed Treasury yields higher. The Federal Reserve raised interest rates by 25 basis points on Wednesday and indicated that further increases may be needed to curb inflation fueled by higher energy costs linked to the war in Iran. US equity funds saw net outflows of $31.44 billion, marking a fourth consecutive week of outflows, while European equity funds recorded net outflows of $295 million and Asian funds attracted net inflows of $6.26 billion. The latest data shows investors withdrew $31.44 billion from US equity funds during the week, broadly in line with the $32 billion withdrawn in the previous week, as reported by Reuters.
The US ETF market has achieved a historic milestone, with $16 trillion parked across 5,401 US-domiciled ETFs at the end of June 2026, according to Morningstar Manager Research's State of US ETFs 2026 report. US-listed ETF inflows crossed the $1 trillion mark for 2026 by mid-June, a pace described as shocking even against the backdrop of consecutive record-setting years. The market has never been larger or more complicated to navigate, with more than 1,000 new funds launched in 2025 alone and the pace showing no signs of slowing. As reported by Bloomberg, this represents a significant acceleration in ETF adoption, with the volume of capital moving through the market making due diligence more important than ever.
Investor sentiment has fallen to its lowest level since May 2025, according to the latest AAII survey released Friday. The bearish investor sentiment reached 53.3%, while bullish sentiment dropped to 28.8%, marking the lowest reading in a year. As reported by The Economic Times, the bull-bear spread fell to -24.5%, which is unusually low and below its historical average of 6.5% for the ninth consecutive week. This represents the lowest sentiment reading since May 2025, with the bulls falling 10 points in just one week - the fewest bulls seen in a year. The bears surged to 53.3%, which is the highest reading for bears since the Tariff Tantrum, indicating a significant shift in market sentiment driven by inflation concerns and Fed policy expectations.
The decline in sentiment is attributed to several key factors affecting individual investors. According to The Economic Times, elevated oil prices, a Fed rate hike, and market volatility have fueled caution among investors. The Federal Reserve raised interest rates for the first time since 2023, contributing to the current market environment. Traders typically use this sentiment gauge as a contrarian indicator, with low readings indicating investor fear and high readings showing complacency. The put/call ratio was .90, telling us that an awful lot of folks felt the recent rally was nothing to write home about, despite some excitement about the day's performance. The Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, its first rate increase in more than three years, with markets also assessing the possibility of another rate increase at the Fed's October meeting.
The survey revealed significant changes in investor positioning, with over half of respondents having larger allocations to cash than normal. As reported by The Economic Times, 19.1% of respondents said their cash allocations were 'much higher than normal', representing a clear sign of investor caution. This increased cash positioning comes as the S&P 500 Index remains some 2% from its all-time high following a period of late-summer volatility. The NAAIM exposure to the market has been reduced to a fraction under 72, which is now the lowest reading since the spring lows, indicating a significant shift in institutional positioning. Money market funds also experienced significant withdrawals, with investors pulling $58.87 billion, the largest weekly outflow from the category since July 15.
The current sentiment reading represents a significant shift from previous market conditions, with the bull-bear spread falling to -24.5% below its historical average of 6.5%. This contrarian indicator suggests that current market conditions may present opportunities for investors who view the current pessimism as overdone. The timing coincides with the S&P 500 being positioned near all-time highs, creating a potentially volatile environment for near-term market movements. The ten-day moving average of the put/call ratio is rising, suggesting that if we get a few more down days and readings over .90, we might just get this to the upper 80s/low 90s, indicating a potential shift in overall market sentiment. Despite the broader outflows, small-cap funds bucked the trend, attracting $568 million during the week, while sector funds showed selective strength with financial-sector funds attracting $1.37 billion and technology funds drawing $775 million.
