Are Traders Losing Faith? – Weekly ETF Fund Flows
Last week ETF fund flows took on a more cautious note than they had been over the last few months.
The main culprits are falling oil prices and weak global economic data. As a result, we saw fearful traders taking up bearish positions using put options to protect their profits from a stock market pullback.
The CBOE Volatility Index (VIX) shot up to its highest level since October as investors become more fearful.
In a clear indication of fear, many broad based US stock ETFs saw a net outflow of money. The ETF with the largest net outflow was the SPDR S&P 500 (SPY) that lost $2.2 billion in assets.
What’s more, the PowerShares QQQ (QQQ) lost $1.6 billion and the iShares MSCI Emerging Markets ETF (EEM) lost $1.1 billion.
Needless to say, some big investors are starting to pull money out of US equities for the first time since they took off back in October.
However, we did see strong inflows into sector specific ETFs…
The biggest winners were ETFs focused on financials. The iShares US Financials (IYF) had net inflows of $746 million and the Financial Select Sector SPDR (XLF) had $660 million in net inflows.
Another ETF that experienced a large net inflow was the Consumer Discretionary Select Sector SPDR (XLY). XLY added $610 million in assets under management.
ETF investors that poured money into these ETFs are clearly looking at the drop in oil prices as a positive for consumers and businesses that consume oil.
That sentiment is confirmed by the uptick in the American Association of Individual Investors Sentiment Survey. The number of investors that are bullish on stocks over the next six months jumped 2.3% from the previous week.
Traders are clearly becoming more fearful of the impact falling oil prices will have on the overall stock market.
They are reducing their positions in broad based US stock ETFs like SPY. And they are increasing their positions in sector based ETFs that should benefit the most from the drop in oil prices like XLY and XLF.
Here’s the bottom line…
For now, it seems that the bulls are in control of the market… as long as you avoid anything to do with the energy sector. But the uptick in fear could lead to a market correction in the near future.
Good Investing,
Corey Williams
Category: ETFs, Market Analysis
