Santa Claus Rally Lights Up U.S. Equity Funds Amid Cooler Inflation

U.S. equity funds are basking in some much-needed holiday cheer, pulling in $20.56 billion in the week leading to Dec. 25. This rebound follows last week’s massive $49.7 billion sell-off, thanks to a cocktail of investor optimism: cooling inflation, a stopgap funding bill that dodged a government shutdown. However, small-cap, mid-cap, and multi-cap funds experienced a total outflow of almost $5 billion, with investors gravitating toward the perceived safety and stability offered by large-cap stocks. U.S. bond funds recorded their second straight week of outflows, totaling $5.42 billion. Meanwhile, the real surprise came from U.S. money market funds, which snapped up a hefty $41.72 billion in net inflows. As the year wraps up, all eyes are on how long this seasonal glow will last. Will the Federal Reserve deliver the rate cuts investors are betting on, or is this rally just a brief holiday reprieve?

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