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The appeal of U.S. equities brightened in July, as the broader market steadied to start Q3. The global market took a breather from the horrendous Brexit-led sell-off in late June. Rock-bottom yields in most developed economies and a less-than-feared impact of Brexit (at least so far) probably triggered a risk-on rally. Also, slight stabilization in oil prices in early July and a volley of upbeat U.S. economic data acted as tailwinds (read: Top ETF Stories of July).
Against such a backdrop, let’s find out which corners of the ETF world created assets and which ones shed (per etf.com). The net inflows data are from July 1 to July 28.
U.S. Equities ETFs: The Bright Corner
The S&P 500 was on radar as investors flocked to SPDR S&P 500 ETF Trust (SPY - Free Report) . The fund garnered about $13.74 billion in assets in the month. This is a clear indication of restored confidence in the riskier asset segments. In fact, the S&P 500 hit record highs many a times in July propelling all S&P 500 driven ETFs. iShares Core S&P 500 ETF IVV and Vanguard S&P 500 Index Fund (VOO - Free Report) also garneredabout $1.87 billion and $1.16 billion in net assets. In fact, PowerShares QQQ Trust (QQQ - Free Report) also attractedabout $1.48 billion in assets thanks to impressive tech earnings.
Corporate Bond ETFs Are Back
Since yields on the 10-year U.S. Treasury plunged to record lows, the lure for higher-yielding corporate bond ETFs returned. Thus, iShares iBoxx $ Investment Grade Corporate Bond ((LQD - Free Report) ) attracted about $1.85 billion in net assets in the month followed by the junk bond fund iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) , which gathered about $1.62 billion in assets.
Assets also flooded the aggregate bond space as iShares Core U.S. Aggregate Bond (AGG) accumulated about $1.41 billion. Emerging market bond ETFs like iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) , which yields about 3.84% annually, scooped upabout $1.51 billion in assets (read: Yield Hungry Investors Gobble Up EM Bond ETFs).
Emerging Markets in Favor
As the risk-on mood was prevalent in July, emerging market ETFs were in vogue. Relatively higher commodity prices (most EM economies are commodity-rich), a subdued greenback on a dovish Fed and the hunt for yield made this space a winner. iShares MSCI Emerging Markets ETF (EEM - Free Report) and iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) thus amassed about $3.66 billion and $1.02 billion in net assets, respectively (read: EM ETFs Had a Seven-Year Best 1H: Will the Surge Last?).
Non Currency-Hedged Japan ETF: Top Loser
Though the month was favorable for Japan ETFs as prime minister Abe announced plans of a massive stimulus package, non-currency-hedged fund iShares MSCI Japan ETF (EWJ - Free Report) lost about $1.48 billion in net assets. This is probably because, for the most part of the month, market watchers speculated the launch of “helicopter money” to jazz up inflation and growth in the economy.
This pushed down yen and might have discouraged investors from pouring money into regular Japan ETFs like EWJ. However, investors should note that finally, no helicopter took off in the BoJ meeting at month end (read: Can Japan ETFs Soar Without Helicopter Money?).
Europe Peters Out
Economic events mostly went against Europe in July. First, Euro zone growth slackened to a quarterly rate of 0.3% in Q2 from the prior quarter's 0.6%. Plus, the zone is extremely vulnerable to the Brexit fallout. If this was not enough, banking sector woes in Italy are slowly taking a bigger shape and shaking investors’ confidence.
As a result, Vanguard FTSE Europe ETFVGK, iShares MSCI Eurozone ETF (EZU - Free Report) and WisdomTree Europe Hedged Equity FundHEDJ shed about $1.37 billion, $1.35 billion and $1.13 billion, respectively.
Defensive U.S. Equity Sectors Fizzle
As risks predominated, risk-off trade sentiments took a backseat. And consumer staples and utility – known for their defensive nature – lost status in July. Consumer Staples Select Sector SPDR Fund (XLP - Free Report) and Utilities Select Sector SPDR Fund (XLU - Free Report) saw net assets worth $507.3 million and $425.4 million, respectively, gushing out.
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July ETF Asset Report: U.S. Tops, Europe Flops
The appeal of U.S. equities brightened in July, as the broader market steadied to start Q3. The global market took a breather from the horrendous Brexit-led sell-off in late June. Rock-bottom yields in most developed economies and a less-than-feared impact of Brexit (at least so far) probably triggered a risk-on rally. Also, slight stabilization in oil prices in early July and a volley of upbeat U.S. economic data acted as tailwinds (read: Top ETF Stories of July).
Against such a backdrop, let’s find out which corners of the ETF world created assets and which ones shed (per etf.com). The net inflows data are from July 1 to July 28.
U.S. Equities ETFs: The Bright Corner
The S&P 500 was on radar as investors flocked to SPDR S&P 500 ETF Trust (SPY - Free Report) . The fund garnered about $13.74 billion in assets in the month. This is a clear indication of restored confidence in the riskier asset segments. In fact, the S&P 500 hit record highs many a times in July propelling all S&P 500 driven ETFs. iShares Core S&P 500 ETF IVV and Vanguard S&P 500 Index Fund (VOO - Free Report) also garneredabout $1.87 billion and $1.16 billion in net assets. In fact, PowerShares QQQ Trust (QQQ - Free Report) also attractedabout $1.48 billion in assets thanks to impressive tech earnings.
Corporate Bond ETFs Are Back
Since yields on the 10-year U.S. Treasury plunged to record lows, the lure for higher-yielding corporate bond ETFs returned. Thus, iShares iBoxx $ Investment Grade Corporate Bond ((LQD - Free Report) ) attracted about $1.85 billion in net assets in the month followed by the junk bond fund iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) , which gathered about $1.62 billion in assets.
Assets also flooded the aggregate bond space as iShares Core U.S. Aggregate Bond (AGG) accumulated about $1.41 billion. Emerging market bond ETFs like iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) , which yields about 3.84% annually, scooped upabout $1.51 billion in assets (read: Yield Hungry Investors Gobble Up EM Bond ETFs).
Emerging Markets in Favor
As the risk-on mood was prevalent in July, emerging market ETFs were in vogue. Relatively higher commodity prices (most EM economies are commodity-rich), a subdued greenback on a dovish Fed and the hunt for yield made this space a winner. iShares MSCI Emerging Markets ETF (EEM - Free Report) and iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) thus amassed about $3.66 billion and $1.02 billion in net assets, respectively (read: EM ETFs Had a Seven-Year Best 1H: Will the Surge Last?).
Non Currency-Hedged Japan ETF: Top Loser
Though the month was favorable for Japan ETFs as prime minister Abe announced plans of a massive stimulus package, non-currency-hedged fund iShares MSCI Japan ETF (EWJ - Free Report) lost about $1.48 billion in net assets. This is probably because, for the most part of the month, market watchers speculated the launch of “helicopter money” to jazz up inflation and growth in the economy.
This pushed down yen and might have discouraged investors from pouring money into regular Japan ETFs like EWJ. However, investors should note that finally, no helicopter took off in the BoJ meeting at month end (read: Can Japan ETFs Soar Without Helicopter Money?).
Europe Peters Out
Economic events mostly went against Europe in July. First, Euro zone growth slackened to a quarterly rate of 0.3% in Q2 from the prior quarter's 0.6%. Plus, the zone is extremely vulnerable to the Brexit fallout. If this was not enough, banking sector woes in Italy are slowly taking a bigger shape and shaking investors’ confidence.
As a result, Vanguard FTSE Europe ETF VGK, iShares MSCI Eurozone ETF (EZU - Free Report) and WisdomTree Europe Hedged Equity Fund HEDJ shed about $1.37 billion, $1.35 billion and $1.13 billion, respectively.
Defensive U.S. Equity Sectors Fizzle
As risks predominated, risk-off trade sentiments took a backseat. And consumer staples and utility – known for their defensive nature – lost status in July. Consumer Staples Select Sector SPDR Fund (XLP - Free Report) and Utilities Select Sector SPDR Fund (XLU - Free Report) saw net assets worth $507.3 million and $425.4 million, respectively, gushing out.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>