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Weekly ETF Roundup: International Tops, Nasdaq & Gold Bleed

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Overall, ETFs gathered about $12.5 billion capital last week, bringing in year-to-date inflows of $164.9 billion, higher than $86.9 billion seen in the year-ago period. International equity ETFs led the way higher last week with $5.9 billion inflows, closely followed by $3.3 billion in U.S. fixed income ETFs and $3.3 billion in U.S. equity ETFs, per etf.com.

International ETFs Rock

Vanguard FTSE Emerging Markets ETF (VWO - Free Report) topped the creation list, pulling in more than $1.2 billion of capital last week. This was followed by iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) with inflows of more than $1 billion. Both funds offer exposure to emerging markets and has a Zacks ETF Rank #3 (Hold).

According to data compiled by Bloomberg, VWO has received more money in the past five days through Thursday than any of the 2,400 plus funds in U.S. exchanges, pushing the ETF toward its biggest weekly inflow in two years. Many analysts are bullish on the emerging market equities and have raised their estimates for emerging market equities, citing that these are the prime beneficiaries of the post-coronavirus economic rebound (read: Time for Emerging Market ETFs?).

Money managers from Ashmore Group to JPMorgan Chase and UBS Group attributed their optimism to Asia’s relative success in containing the pandemic, vaccine breakthroughs in China, India and Russia, renewed demand for commodities, and Joe Biden’s $1.9 trillion stimulus plan. Additionally, emerging-market equities trade at an almost 29% discount to U.S. stocks compared with an average of 25% in the past 15 years.

Small-Cap and Financial Tops

iShares Russell 2000 ETF (IWM - Free Report) and Financial Select Sector SPDR Fund (XLF - Free Report) gathered more than $1 billion in assets each. IWM provides exposure to the small-cap corner of the broad stock market while XLF targets the financial segment. The duo has a Zacks ETF Rank #3.

Investors flocked to small caps on renewed optimism over speedy economic recovery from the pandemic-driven recession thanks to hopes of a further fiscal relief package, signs of a healing labor market, continued progress in more vaccines and a rapid vaccination rollout. The combination of all these factors will lead to pent-up demand resulting in higher demand for all types of products and services in the economy (read: Great Rotation From Bonds to Stocks: ETFs to Win).

Meanwhile, a spike in long-term yields has raised the appeal for financial ETFs. This is because a rising interest rate scenario is highly profitable for the financial sector, as the steepening yield curve would bolster profits for banks, insurance companies, discount brokerage firms and asset managers.

New ETF “BUZZ”: A Rising Star

The newly minted VanEck Vectors Social Sentiment ETF BUZZ saw solid investors interest with inflows of more than $280 million in the first week of the debut. The fund tracks the BUZZ NextGen AI US Sentiment Leaders Index, which measures the performance of the 75 large cap U.S. stocks exhibiting the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources including social media, news articles, blog posts and other alternative datasets.

U.S. Large-Cap Equity Mixed

Invesco QQQ (QQQ - Free Report) led the redemption list last week, pulling out about $3.5 billion in assets. It provides exposure to the largest domestic and international non-financial companies listed on the Nasdaq and has a Zacks ETF Rank #1 (Strong Buy). Surging yields sparked fears of overvaluation, especially in the tech sector, which outperformed during the pandemic and has significant exposure to the Nasdaq Index.

This is because the sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. Thus, a rise in long-term yields lowers the present value of companies’ future earnings (read: How to Short Nasdaq With Inverse ETFs).

However, Vanguard Total Stock Market ETF (VTI - Free Report) and Vanguard S&P 500 ETF (VOO - Free Report) accumulated $896 million and $770 million, respectively, last week. The former provides diversified exposure across all market caps as well as growth and value styles, and has a Zacks ETF Rank #2 (Buy). On the other hand, VOO tracks the S&P 500 and has a Zacks ETF Rank #3 (read: 6 Red-Hot ETFs of February).

Gold & Silver Bleeds

The two popular gold ETFs — SPDR Gold Trust ETF (GLD - Free Report) and iShares Gold Trust (IAU - Free Report) — saw outflows of $1.2 billion and $517 million, respectively. Both ETFs track the performance of the price of gold bullion and are backed by a physical asset. The expectation for swift economic recovery has diminished the appeal for gold as a store of value. The duo has a Zacks ETF Rank #3.

The ultra-popular iShares Silver Trust (SLV - Free Report) , which offers exposure to the day-to-day movement of the price of silver bullion, also lost investor interest last week, pulling out about $456 million in assets last week. The product has a Zacks ETF Rank #3.

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