Who Yelled Fire? Investors Run For Exits – Weekly ETF Fund Flows
Today we’re taking a look at ETF fund flows in – Financial Select SPDR (XLF), SPDR S&P 500 (SPY), Vanguard FTSE Emerging Markets (VWO), iShares Russell 2000 (IWM), iShares Dow Jones US Real Estate (IYR), and SPDR Gold (GLD).
ETF fund flows are a valuable indicator of what traders are thinking. It takes a lot of buying or selling to drive millions of dollars into or out of individual ETFs.
They’re 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 at the leading ETFs in net inflows and net outflows from June 17th to June 21st.
Last week Fed Chairman Bernanke essentially yelled “FIRE” in a crowded theater. Investors spent the rest of the week selling everything and opting for the relative safety of cash.
As a result, ETF redemptions outpaced creations by a wide margin.
The only ETF to register over $500 million in net inflows was the Financial Select SPDR (XLF). But the majority of buying took place ahead of the FOMC statement on Wednesday. It simply didn’t have the same surge in redemptions toward the end of the week.
Why did investors hold onto XLF?
The Fed’s comments have sparked an unprecedented rise in interest rates. According to research from Bespoke, the yield on the 10-year Treasury is now 33.3% above its 50-day moving average. That’s the farthest the 10-year yield has been above its 50-day moving average in at least 50 years!
Financial stocks are widely believed to be one of the few sectors that will benefit from rising interest rates. So, if you’re going to have money in stocks, the financial sector could be the cleanest shirt in the dirty laundry.
On the other hand, SPDR S&P 500 (SPY) led all ETFs with $2.6 billion in redemptions last week. But the losses weren’t contained to SPY. Emerging market ETFs, Small Cap ETFs, REIT ETFs, and Gold ETFs all saw outflows as well.
Some of the ETFs with the biggest outflows were Vanguard FTSE Emerging Markets (VWO) with $1.2 billion, iShares Russell 2000 (IWM) with $921 million, iShares Dow Jones US Real Estate (IYR) with $756 million, and SPDR Gold (GLD) with $559 million.
There isn’t anywhere to hide when all asset classes are selling off at once.
Here’s the thing…
The Fed’s recent commentary has undermined investor confidence in the Fed to control interest rates and influence the economy. That startling revelation is forcing investors to rethink everything.
The bottom line is investors are adjusting to a new reality in the wake of the Fed. And the knee jerk reaction has been to sell first and ask questions later.
Until there’s some clarity on interest rates, it will likely continue to be a drag on stocks and drive even more redemptions in the days ahead.
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: ETFs, Foreign Market ETFs, Index ETFs
