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November 3, 2023
ETF Fund Flows - October 20, 2023
ETF fund flows define the net dollar inflows and outflows for exchange traded funds over predefined periods. 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 Energy (XLE) sector topped the list of sectors with $3.2 billion in net inflows. Meanwhile, its fair to say that good things dont happen when the index is trading belwo the 50-Day moving average. By way of example, heavy selling has taken place in Technology (XLK), Financial (XLF), Health Care (XLV), Industrial (XLI), Utility (XLU) and Consumer Discretionary (XLY) shares. This trend could quickly accelerate as the index tests the 200-day moving average.
US Equities – Factor Indexes
Stock market factors define the key drivers of stock market returns. The primary factors include:
- the size of firms (for small vs. large capitalization),
- book-to-market value (for high cost Growth vs. low cost Value shares),
- momentum (for stocks with high returns versus index),
- quality (for firms with strong financial KPIs),
- volatility (for low beta stocks), and
- dividends (for shares with high payouts).
Not surprisingly, in the current environment, all factor indices are being sold. However, the heaviest selling is evident in Small Cap (IJR) and Mid Cap (IJH) shares.
International Equities – Developed Markets
ETF fund flows for international developed markets are profiled below. The main story line here is simple: large outflows are again evident with the exception of Switzerland (EWL). This is not surprising as the Swiss Franc has been benefiting from a flight to quality in turbulent times, similar to gold and silver..
International Equities – Emerging Markets
The chart shows fund flows for the emerging international markets. Large selling is evident in the Emerging Market Index (IEMG) with liquidations of over $2 billion in the last 5 days. The weakest markets include China (MCHI), Saudi Arabia (KSA) and Taiwan (EWT). .
Fixed Income – Government Bonds
Fixed income securities are the only asset class with decent inflows in the last 5 and 10 days. However, results across the yield curve are mixed. For example, tactical inflows are primarily benefiting 20 year+ T-bonds (TLT) and 3-7 year T-Notes. Across, the product slate, short-term Treasury Inflation Protected Securities (STIPS) and 1-5 year Municipal Bonds (SUB) are also benefiting. The heaviest selling in the asset class has focused on the Aggregate Bond Index (AGG), 10-20 year T-Bonds (TLH), and the international Aggregate Index (IAGG).
Fixed Income – Corporate Bonds /Infrastructure Projects
One of the largest sector rotations of recent days was the $5 billion in outflows hitting high yield bonds (HYG), Investment grade bonds (LQD), and 5-10 year corporate bonds (IGIB). Only short-term investment grade corporate bonds (IGSB) are benefiting in the current environment.
Commodities – Gold vs Silver
Both gold (IAU) and silver (SLV) ETFs are seeing solid inflows over the last two weeks.
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