Last week was marked by wild swings in the U.S. stock market driven by renewed inflation fears, potential hike in corporate taxes, Fed’s tapering talks and concerns over a slowdown in economic growth. The three major indices ended last week in red with the tech-heavy Nasdaq Composite Index suffering the biggest decline.
The spate of latest data shows that rising Delta variant cases is derailing the activities and threatening the continued reopening of economies. U.S. consumer sentiment remained close to a near-decade low in early September, while buying conditions for household durables deteriorated to their worst since 1980 because of high prices. U.S. producer prices rose 8.3% year over year in August, leading to the biggest annual gain in nearly 11 years. This also indicates that high inflation will persist since the pandemic will put pressure on supply chains. While consumer sentiment is still downbeat and inflation is picking up, a report showing an unexpected jump in August retail sales with gains across most categories, suggests steady demand (read: August Retail Sales Shine: ETFs & Stocks to Win). Despite volatility, investors have poured in a near record amount of money into ETFs partly driven by worries over a tax hike. This is because the ETFs are more tax efficient than mutual funds. Mutual fund managers need to sell securities to raise cash for redemptions in case an investor exits the fund, which triggers a taxable event for all investors. On the other hand, ETFs follow an “in-kind” creation and redemption process where ETF issuers exchange shares for baskets of underlying securities, which do not trigger a taxable event. Per Bloomberg, ETFs’ tax efficiency characteristic could be a boon for those looking at a higher tax bill. This would accelerate the ongoing shift that has shifted hundreds of billions of dollars from mutual funds to ETFs. As such, ETFs overall gathered about $62.2 billion capital last week (ending Sep 16), just shy of the weekly record of $71 billion set in March. This brings in year-to-date inflows of $669.8 billion, double the $332.5 billion seen at this same time a year ago. With this, ETFs are on track for more than $900 billion of inflows in 2021. U.S. equity ETFs led the way higher last week with $52.7 billion inflows, closely followed by $4.1 billion in international equity ETFs and $4 billion in U.S. fixed income ETFs, per etf.com. Further, investors should note that Vanguard products led the ETF creations list last week, dominating about half of the weekly inflows. Here, we have highlighted the top five asset gatherers: SPDR S&P 500 ETF Trust ( SPY Quick Quote SPY - Free Report) SPY topped asset flow creation last week, gathering $10.6 billion in capital. It tracks the S&P 500 Index and holds 505 stocks in its basket with information technology, healthcare, consumer discretionary, communication services and financials being the top five, with a double-digit allocation each. With AUM of $410.3 billion, the ETF charges investors 9 bps in annual fees and trades in an average daily volume of 55 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Tax Hike in the Cards? ETFs in Focus). Vanguard Total Stock Market ETF ( VTI Quick Quote VTI - Free Report) This fund has accumulated $3.5 billion in capital, taking its total AUM to $274.4 billion. It provides exposure to the broader stock market by tracking the CRSP US Total Market Index. The ETF holds a large basket of well-diversified 3,980 stocks with key holdings in technology, consumer discretionary, industrials, healthcare and financials. It charges 3 bps in fees per year from investors and trades in an average daily volume 3.1 million shares. VTI has a Zacks ETF Rank #2 with a Medium risk outlook. Vanguard Dividend Appreciation ETF ( VIG Quick Quote VIG - Free Report) VIG gathered $3 billion in capital last week. This is the largest and the most popular ETF in the dividend space with AUM of $66 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high-quality stocks that have a record of raising dividends every year. It holds 247 securities in the basket with none accounting for more than 4.5% share. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Dividend Aristocrat ETFs Investing Guide). Vanguard Extended Market ETF ( VXF Quick Quote VXF - Free Report) This ETF accumulated about $2.9 billion last week, taking its total AUM to $20.3 billion. It follows the S&P Completion Index, which contains all of the U.S. common stocks regularly traded on the New York Stock Exchange and the Nasdaq over-the-counter market, except those stocks included on the S&P 500 Index. The fund is a home to 3,535 stocks with each accounting for no more than 1.3% share. It charges 6 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook. Vanguard Mid-Cap ETF ( VO Quick Quote VO - Free Report) This fund gathered $2.8 billion in capital last week. It targets the mid-cap segment of the broad stock market and tracks the CRSP US Mid Cap Index. With AUM of $55.4 billion, the fund holds 373 stocks with a well-diversified portfolio as each firm holds no more than 1% of the total assets. The product charges investors 4 bps in fees per year and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Mid-Cap ETFs Looking Good Amid Market Uncertainties).