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April 2023 Returns and Asset Performance
May 1, 2023
May 2023 Returns and Asset Performance
June 1, 2023
Published by Brad Horn on May 18, 2023
Categories
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Tags
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ETF Fund Flows | Saffron Capital | Minneapolis

ETF Fund Flows - May 17, 2023

ETF fund flows define the net dollar inflows and outflows for exchange traded funds.  Fund flows are useful to identify market trends.  The data broadly reveals the rotations investors make as they shift their funds across different assets, market sectors, or indexes.  The following article compares short and intermediate fund flows.

US Equities – Sector Indexes

ETF fund flows by sector define tactical rotations within the S&P 500 index. For example, there are 11 sectors in the S&P 500 index.  Over the last 10 days, the Technology (XLK) sector topped the list of sectors with over $2 billion in net inflows, the bulk of which occurred in the last few days.  Meanwhile, Communication Services (XLC) and Consumer Durable (XLY) sectors also had large inflows over the last 5- and 10-day period. In contrast, 8 of the 11 S&P 500 sectors had net outflows.  The Financial (XLF) sector had the greatest outflows at $1.4 billion , followed by the Energy (XLE) and Health Care (XLV) sectors, as shown below.

ETF Fund Flows by Sector | Saffron Capital

US Equities – Factor Indexes

Stock market factors define the key drivers of stock market returns.  Pprimary factors include the size of firms (small vs. large), book-to-market value (high vs. low value shares) and dividends (high vs. low payouts).  ETF fund flows by factor are profiled below. Surprisingly, we see the small cap S&P 600 index (IJR) on top of the 5-day inflows.  This suggests that the current uptrend might have begun to embrace a broader variety of stocks, improving market breadth.  Moreover, we are also see positive inflows into the S&P 400 mid cap index (IJH).  While these changes are significant, the large-cap S&P 500 index (IVV) and the S&P 500 Growth index (IVW) still dominate inflows over longer time frames.  Finally, as market yields pick up, we also see a rotation away from high dividend shares (HDV).

International Equities – Developed Markets

ETF fund flows for international developed markets are profiled below.  Massive inflows into the equity markets of Japan (EWJ) and Europe (EZU) are evident. Japanese stocks are now up +3.42% in May and 11.8% on a year-to-date basis, easily outperforming US equities.  At the same time, Japanese stocks are also in line to test their market highs from over 30 years ago.  In comparison, the recent inflows into the broad European index seem questionable.  First, the European index is down -1.5% in May.  Second, we see that fund flows by country – for Italy (EWI), Germany (EWG), Switzerland (EWL). and France (EWQ) – are strongly negative when summed together, as seen below. 

ETF Fund Flows Developed Markets | Saffron Capital

International Equities – Emerging Markets

The chart below confirms significant inflows of 1.4 billion into the Emerging Market Index (IEMG) over the last 5 days.   At the country level, its no surprise to see Brazil (EWZ), Mexico (EWW) and Taiwan (EWT) lead the list of 5- and 10-day inflows.  On a year to date basis, these markets are up +7.1%, 25.7% and 13.2%, respectively.  We also see inflows are recovering for the larger markets of India (INDA) and China (MCHI).

ETF Fund Flows Emerging Markets | Saffron Capital

Fixed Income – Government Bonds

Fund flows into US Treasuries reveal tactical allocations across the yield curve.  Currently, we are seeing large inflows into the belly of the yield curve or for maturities of 3 to 10 years. The is most evident given the popularity of the aggregate bond index (AGG) which has an average tenor of roughly 6 years.  We are also seeing modest interest in Emerging market bonds (EMB) even the the World Aggregate bond index (iAGG) has had outflows more recently

Fixed Income – Corporate Bonds /Infrastructure Projects

Investment grade short term corporate bonds (IGSB) had the highest inflows of all corporate bonds over the past 5 days, topping $300 million.  In contract, the broad based IBOXX corporate bond index across all credit ratings and maturities had large outflows of $1.5 billion this week.  Investment grade bonds (LQD) and BBB-rated bonds (LQDB) also had large outflows.  Its also interesting to note that there is  very little activity across the range of high yield or junk bonds in the current environment even though annual yields range from 6-9%.

ETF Fund Flows Corporate Bonds | Saffron Capital

Commodities – Gold vs Silver

ETF fund flows for gold and silver have been negatively impacted by rising interest rates and a rally in the US Dollar.  This is a sharp reversal of recent trends since the start of the year.

ETF Fund Fows Gold vs Silver | Saffron Capital

Do you have questions or concerns about how you allocate your investment funds?  Are you looking to better manage the risk and returns of your portfolio?  Whatever your needs are, we are here to help.  Schedule a meeting with us here.

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Brad Horn
Brad Horn

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