Emerging Markets Bloodbath – Weekly ETF Fund Flows

Today we’re taking a look at ETF fund flows in iShares MSCI Emerging Markets (EEM), Vanguard FTSE Emerging Markets (VWO), and Vanguard Total Bond Market (BND).

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.

iShares MSCI Emerging Markets (EEM) and Vanguard FTSE Emerging Markets (VWO) were two of the biggest losers last week.  Together they shed nearly $4 billion.

The massive outflow of money from the two largest emerging market ETFs is a clear indication of negative sentiment toward emerging markets.  Amazingly, it was the 13^th consecutive week investors have pulled money out of emerging markets ETFs.

Here’s the deal…

The Fed’s slow exit from their monetary stimulus is sending ripples through the global financial system.  Investors are concerned the strengthening US Dollar and higher interest rates are trouble for emerging markets.

At this point, foreign investors are leaving emerging markets in a mass exodus.  They’re seeking safer shores in the US, Japan, and developed Europe.

In other words, this is classic fear driven behavior.  As you know, only fear or greed can dominate Wall Street’s emotions.  And right now it’s fear.

As further proof of Wall Street’s despondent tone, simply look at the ETF leading all ETFs in net inflows over the last week.  It was none other than the Vanguard Total Bond Market (BND).

The 30 year bull market in bonds may be over.  But right now, BND is hot.  It collected $1.2 billion in net inflows last week.

The massive outflow of money from emerging markets is coming home to roost and it’s finding a home in bonds.  The influx of money is driving down interest rates.  That’s good news for bond fund values that move in the opposite direction as interest rates.

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

Tags: emerging markets, iShares MSCI Emerging Markets (EEM), Vanguard FTSE Emerging Markets (VWO), Vanguard Total Bond Market (BND)

Category: ETFs, Market Analysis