Developed Markets ETF Gains While Financial ETFs Lose – Weekly ETF Fund Flows

| August 12, 2013 | 0 Comments

fund flowsToday we’re taking a look at ETF fund flows in Vanguard FTSE Developed Markets (VEA) and Financial Select SPDR (XLF).

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 some interesting fund flows from the leading ETFs from August 5th to August 9th.

Vanguard FTSE Developed Markets (VEA) led all ETFs with $572 million in creations during a slow week of trading.  It had the most creations among several large cap and European stock ETFs.

VEA tracks an index of stocks from developed markets excluding North America.  It’s composed of 60% European stocks and the other 40% comes from countries in the Pacific region.

The shift toward non-US developed market stocks is a big change for traders.  And it could be the leading edge of a major outflow of investor money from a frothy US stock market that’s already up 20% this year.

European stocks offer more upside after lagging behind US stocks.  In fact, VEA is only up about 10% year-to-date.  But European stocks could be on the verge of a big rally.

Here’s why…

This week Europe’s expected to report its first quarterly growth in a year and a half.  If they do, it will mark the end of the European recession.

It’s no secret you can make a boatload of money by investing in stocks when things go from bad to less-bad.  And that seems to be the case in Europe right now.

Investors who plowed hundreds of millions of dollars into VEA and other European stock ETFs are clearly expecting improvement in Europe’s economy to drive stock prices higher across the pond.  And I find it hard to argue with them…

Financial Select SPDR (XLF) saw redemptions accelerate to $557 million last week.  The outflow is a sharp reversal from the $4.2 billion that has flooded into it so far this year.

Investors had been pouring money into XLF as bank earnings’ growth accelerated in the first half of the year.  The strong EPS growth helped XLF jump out to a 25% gain that has bested the S&P 500 by more than 5%.

Lately, the positive headlines about record bank earnings have been met mostly with investor selling… that’s not good.

If positive news doesn’t drive stocks higher, what will?

What’s more, if XLF doesn’t regain its momentum soon, it could spell trouble for US stocks across the board.

Don’t forget, financials have been one of the pillars of the bull market rally in US stocks.  If we lose their valuable leadership, we could see the rotation of money out of US stocks accelerate.

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

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Category: ETFs, Foreign Market ETFs, Sector ETFs, What's Going On?

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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