Investors Back In ‘Risk On’ Mode – Weekly ETF Fund Flows

| February 20, 2014

fund flowsJust a few weeks ago, investors were pulling massive amounts of money out of stock ETFs.  Just about the only ETFs seeing money flow into them were bond ETFs.

But as the S&P 500 found bottom and staged a reversal day on February 5th, the outflows slowed.  And by February 11th after the S&P had logged four strong up days in a row, investors were plowing money back into stock funds once again.

The always popular SPDR S&P 500 (SPY) led the way with net inflows of more than $9 billion over the last week.  It was a sharp reversal of fortunes for SPY that had lost $8.8 billion the week before. 

What’s more, the Vanguard Total Bond Market (BND) led all ETFs with $1.1 billion in outflows.  And several more bond ETFs that had enjoyed strong inflows in the previous week were among the top asset losers over the last week.

This reversal began after Fed Chairman Janet Yellen’s statements that people shouldn’t be too quick to jump to conclusions after the recent bout of weak economic data.

In short, she believes the weakness can be attributed to cold weather that has temporarily hurt the economic and employment data.  But she’s confident the setback is only temporary.

She’s so confident the weakness is weather related she’s going to continue to slow the pace of the Fed’s bond buying stimulus program.  However, she did add if conditions worsened, she would be quick to respond with new or additional stimulus.

Were the Fed’s Chairman’s words really all that were needed to reinvigorate investor optimism?

One thing’s for sure, the massive outflow of money from SPY wasn’t a very good indicator of future returns.  In this case, investors were simply chasing returns. 

In fact, investors were pulling money out of stock ETFs and putting it into bond ETFs at the exact moment they should have been pulling money out of bond ETFs and putting it into stock ETFs.

It’s an important distinction to be made between spotting inflows and outflows that indicate changing investor sentiment about a particular sector, industry, asset class, or region and pure fear selling and performance chasing.

Good Investing,

Corey Williams

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Category: ETFs, Market Analysis

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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