Published on: 2026-09-11
Updated on: 2026-09-11
US stock funds saw a second straight week of cash withdrawals as investor sentiment was hit by climbing bond yields, rising oil prices, and escalating conflict in the Middle East.
The net outflow totalled a $11.12 billion, according to LSEG Lipper data. Technology recorded net withdrawals of $1.39 billion, followed by $1.31 billion and $620 million in financials and industrials, respectively.
The UBS CEO Sergio Ermotti cautioned that investors face an increasingly complicated environment given multiple headwinds. Ongoing wars and resurgent inflation have heightened uncertainties.
Despite pushing for broader diversification, UBS clients have kept their overall asset allocation remarkably steady over the past year, maintaining a strong commitment to US markets rather than launching a widespread retreat.
EM equities ranked among the best-performing asset classes in the first half of 2026. The 10 largest companies represent around 38% of the iShares MSCI Emerging Markets ETF (EEM.P) by market cap.
The asset class continue to trade at their widest discount relative to U.S. equities in over two decades, sitting comfortably below half the valuation of the S&P 500 (SPXUSD).
While this ultra-wide valuation discount looks attractive, analysts caution that the gap can hardly narrow dramatically until macro pressures ease and investors shift out of US mega-caps.
The market is highly vulnerable to unexpected shocks because investor complacency has led to overcrowded trades, narrow credit spreads, and a lack of downside protection.
Popular tech stocks could be struggling time if bond yields and interest rates continue to rise, said Janet Mui, head of market analysis at RBC Brewin Dolphin. She added the tech sector is perceived as elevated.
"We have seen bond yields move up and reach historical levels, and equities have just remained so resilient … a lot of enthusiasm and positivity being priced in after this earnings season. The repeat of that is simply very difficult."
The US Treasury Department's decision to launch a $6 billion bond buyback—tripling its typical $2 billion operation. Still that amount undershoot a shield of $7 - $10 billion that some dealers had anticipated.
Furthermore, a surge of energy prices has reignited core inflation fears, making the liquidity injection look minor against global economic forces. Trump's Iran dilemma has no easy exit.
US job openings edged higher in July, suggesting demand for workers remains broadly stable at a subdued level. That chimes with the latest nonfarm payrolls, which keep the Fed on edge.
DoubleLine Capital CEO Jeffrey Gundlach warned that if the Fed leaves interest rates unchanged at next week's meeting, long-term Treasury yields could rise further, worsening the historic rout.
The S&P 500 Industrials Index is plunging due to surging oil prices and a reversal in the AI trade. It trades at some 24.3 times estimated earnings for the next 12 months, a premium to the broader index's multiple of 20.1.
Energy supply disruptions act as a dual threat for capital-intensive manufacturers by driving up both production costs and borrowing rates, while simultaneously weakening the broader economy that fuels their demand.
US wholesale inflation jumped 0.4% in August, accelerating from an upwardly revised 0.1% in July. Meanwhile, manufacturing sector expanded for an 8th month, backed by strong workplace hiring and rising order backlogs.
Tech giants are investing hundreds of billions of dollars into data-centre expansion, triggering a massive wave of demand for power generation, electrical equipment, and heavy construction machinery.
GE Aerospace (GE.N) and RTX Corp (RTX.N) are among the worst hit as fuel costs spark a sell-off in both jet-engine makers and the airlines they supply. Several airlines have filed for bankruptcy in the second half of this year.
Financial Select Sector SPDR Fund (XLF.P) has largely navigated the downturn on rising rate hike expectations. Sustained consumer spending will ensure financial institutions continue to thrive in this environment.
Led by blowout results from JPMorgan Chase (JPM.N), Goldman Sachs (GS.N), Bank of America (BAC.N), and Wells Fargo (WFC.N), Wall St banks posted record profits for Q2. The earnings streak appears poised to continue.
