Emerging Markets Are Hot, Yellow Metal’s Not – ETF Fund Flows
Today we’re taking a look at ETF fund flows in iShares MSCI Emerging Markets (EEM) and SPDR Gold Trust (GLD).
ETF 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.
Fund flows are something traders use to find trends and gauge investor sentiment. And it can help you pinpoint which ETFs could be next to make a big move higher or lower.
Let’s take a look a few of the ETFs with interesting net inflows and outflows during the week of September 9th to September 13th …
iShares MSCI Emerging Markets (EEM) took in $2.6 billion in fresh capital last week.
EEM fell to a 52-week low of $35.69 in June. Since then, it has rallied 17% but it is still 7% off the 52-week high of $44.74.
The inflow of cash into EEM is a reversal of fortunes for EEM. From May 22nd to September 6th, EEM had experienced an outflow of more than $6 billion.
As I’m sure you know, May 22nd was when the Fed first began to hint they would begin to taper their $85 billion in monthly asset purchases. The news clearly sparked an exodus of foreign capital out of EEM and other emerging markets ETFs.
And for good reason…
We’re in uncharted territory with the Fed stimulus. Nobody knows what the unintended consequences of reducing and eventually ending the Fed’s asset purchases will be.
One thing’s for sure, the expectation of the end of the Fed program has caused interest rates to rise. And in fact, the yield on the 10-year Treasury has soared from record lows to around 3%.
Before the taper rumors began, many believed it would take until 2015 for the 10-year to climb to these levels. But it has only taken a few months…
The jarring move in interest rates has created a new layer of risk for emerging markets.
Not surprisingly, the reversal of fortunes for EEM came when weak US jobs and consumer confidence data gave investors reason to believe the Fed taper could be put off until a later date.
And more fuel was added to the fire when economic data out of China, the world’s largest emerging market, came in better than expected.
Obviously, if emerging markets avoid the hard landing many were anticipating, EEM will continue it recent surge to the upside.
SPDR Gold Trust (GLD) was once again been hit with a large amount of redemptions last week… $348 million flowed out the door last week alone. That brings the year-to-date total to an eye-popping $20.5 billion in asset outflows.
The outflow was sparked by another downdraft in gold prices. GLD was down 5% last week. And it’s down 21% so far this year. The latest selloff began after a two month rally in gold prices.
Here’s the thing…
GLD’s recent rally started from extremely oversold conditions. It took nearly two months for GLD to reach resistance from the downward trending price channel.
The recent outflow and selloff in GLD is a clear indication gold is trapped in a bear market. I’d steer clear of GLD or even look at an inverse ETF like ProShares UltraShort Gold (GLL) to profit from lower gold prices.
That wraps up this week’s ETF fund flows…
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: Commodity ETFs, ETFs, Foreign Market ETFs
