ETF flows reveal confidence in the markets


Despite soaring Treasury yields and declining stock markets, investors in exchange-traded funds continue to pump more money into the stock market.

According to State Street Global Advisors, ETFs listed in the United States are off to the best start in their history. Inflows totaled $ 152 billion in the first two months of 2021. Inflows for the first two months of the year exceed the previous best start by more than 74%, or $ 88 billion, in 2017.

“In fact, only the flows of November and December 2020, when the two headwinds of the vaccination schedule and electoral uncertainty were initially removed, provided a better two-month period. The combination of the last two months of 2020 and the first two months of 2021 leads to a total of $ 309 billion in flows in the last four months. If those four months were a full calendar year, it would rank fifth all-time – a strong testament to the bullish positioning of investors lately, ”said Matthew J Bartolini, SPDR Americas Research Manager, State Street Global Advisors, in the Note.

Specifically, equity ETFs generated $ 84 billion in new inflows, 13.5 times more last month than their typical 10-year monthly average in February of $ 6.3 billion. After $ 15 billion in February, sector ETFs have now cashed in $ 21 billion to start the year, up 40% from their previous best start, which was $ 15 billion in 2017.

Broad-based commodities funds drew the most inflows on record last month at $ 1 billion, another signal of reflationary investor positioning.

Lending ETF flows last month also ranked fourth all-time, bringing the 2021 totals to nearly $ 3 billion.

In addition, active funds brought in $ 14 billion last month and now represent more than $ 200 billion in assets for the very first time.

Bartolini noted that the record monthly flows so far go against typical New Year trends. On average, over the past ten years, January has been the eighth best month in terms of new ETF flows, while February comes down as the tenth best month.

“Underground flows continue to paint a picture of cyclically oriented bullish positioning, as well as a picture in which investors are looking for specific pockets of opportunity and not just buying a wide beta to participate in the recovery,” added Bartolini.

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