Investors Flock to U.S. Equity Funds Ahead of Potential Fed Rate Cut

In the week leading up to August 15, 2025, the U.S. equity market experienced a significant surge in investor interest. According to the data, U.S. equity funds gained a substantial $8.77 billion in net inflows during this period, partially offsetting the $13.89 billion in outflows recorded the previous week.

This reversal in investor sentiment was largely driven by the growing expectations of a potential Federal Reserve rate cut in September. The nomination of a new Federal Reserve Board member last week, coupled with a softer consumer price report on Tuesday, boosted these expectations. However, Thursday's higher-than-expected producer price inflation report tempered some of this optimism.

The tech sector was a standout performer, receiving $3.35 billion in net inflows, the largest amount for a week in the past 4.5 years. This surge was attributed to Apple Inc.'s pledge of new U.S. investments, which aimed to avoid potential tariffs on iPhones. In contrast, the communication services and healthcare sectors saw net outflows of $733 million and $557 million, respectively.

Alongside the equity market, U.S. bond funds also continued to attract investor interest, drawing a 17th straight weekly inflow totaling $6.87 billion. This included significant net buying in short-to-intermediate investment-grade funds, as well as short-to-intermediate government and treasury funds.