The Federal Reserve's interest rate cut stimulates optimistic sentiment, and U.S. stock funds see inflows for the first time in three weeks, but the AI sector is neglected

Driven by expectations of interest rate cuts, U.S. stock funds have seen a turnaround after three consecutive weeks of outflows. For the week ending December 10, U.S. stock funds recorded a net inflow of $3.3 billion, nearly recovering the previous week's net outflow of $3.52 billion.

On the sector level, U.S. equity sector funds gained a net inflow of $2.81 billion, marking the largest single-week inflow since late October. Notably, the metals and mining, industrial, and healthcare sectors performed well, with net inflows of $672 million, $548 million, and $527 million, respectively.

It is worth noting that despite the interest rate cut expectations boosting overall risk appetite, the investment enthusiasm for the artificial intelligence sector has cooled. Oracle's latest earnings guidance fell short of expectations, exacerbating market concerns about the slowing profit growth of AI companies, reflecting that investors are becoming more cautious in evaluating high-valuation tech sectors amid easing expectations. At the same time, this indicates that investors are seeking traditional sectors that benefit from the economic cycle and interest rate cuts, rather than continuing to chase previously high-performing tech stocks.

Demand for Bond Funds Also Heats Up

The bond market has also been significantly boosted by expectations of interest rate cuts. U.S. bond funds saw a net inflow of $3.49 billion for the week, a substantial increase from the previous week's $291 million. The allocation of funds shows structural characteristics: short- to medium-term investment-grade bond funds received a net inflow of $2.61 billion, reaching a seven-week high; while general domestic taxable fixed-income funds experienced a net outflow of $902 million.

The money market showed clear signs of a shift in funds, turning from a strong net inflow of $105.03 billion the previous week to a net outflow of $4.58 billion this week. This change reflects that, driven by expectations of interest rate cuts, investors are gradually shifting funds from low-yield cash-like assets to risk assets such as stocks and bonds, aligning with the typical asset allocation adjustment logic during a monetary policy easing cycle.

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