3rd Quarter ETF Fund Flows
As the 3rd quarter draws to a close, it’s time to take a look at how the ETF fund flows are shaping up for September and the quarter.
Fund flows are a valuable indicator of what traders are thinking. It takes a lot of buying or selling to drive millions or even billions of dollars into or out of individual ETFs.
Combining the fund flow data with other sentiment trackers like the AAII Investor Sentiment Survey and the Fear & Greed Index, we can find important trends. They can help you pinpoint which ETFs could be next to make a big move higher or lower.
So far this month, we’ve seen overall inflows into US listed ETFs outpace outflows by more than $20 billion. The inflow comes despite a lackluster month for stocks… the S&P 500 is currently 2.2% below the 52-week high it set earlier this month.
The strong month of inflows helped push the total net inflows for the third quarter to more than $50 billion. Investors are clearly continuing to allocate money to ETFs despite any concerns they may have about the current bull market.
Two ETFs focused on the S&P 500 had the biggest net inflow during the third quarter. SPDR S&P 500 (SPY) led the way with more than $13.5 billion and iShares Core S&P 500 (IVV) had $2.9 billion in net inflows for the quarter.
Over the same time, the tech heavy PowerShares QQQ (QQQ) led all ETFs with $2.5 billion in outflows. We also saw outflows from Europe focused ETFs like iShares MSCI EMU (EZU) and Vanguard FTSE Europe (VGK).
Overall the fund flow data indicate that investors are favoring investments in US large-cap stocks while cutting ties with Europe and higher risk US stocks.
What’s more, there are signs of extreme fear in the market outside of stocks.
The CBOE Volatility Index (VIX) is well above the recent lows… an indication investors are concerned about a correction in the near future. And we’ve seen market momentum and breadth fall to its lowest levels in months.
Despite those fears, the AAII Investor Sentiment Survey showed investors remain more bullish than usual.
Last week, 41.8% of investors said they were bullish while 28.2% said they were bearish. That’s above the long-term average of 39.0% bullish and below the 30.5% bearish.
But it’s important to note that bearish sentiment jumped 5.2% over the last week. So many investors that had been neutral toward the market are turning bearish.
Here’s the thing…
The recent uptick in bearishness, along with several indicators showing investors are becoming more fearful, is concerning… but only in the short term.
The strong quarter of net inflows, along with the bullish investor sentiment, is a clear indication investors are still confident in US large cap stocks.
Keep in mind, there’s a lot of information about ETF fund flows. And it can be a very useful tool as long as you know what you’re looking for.
Good Investing,
Corey Williams
Category: ETFs, Market Analysis
