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ETF Asset Report of May: S&P 500 Tops

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The month of May is cursed. Per an old adage, investors should “Sell in May and Go Away.” This May too wasn’t free from shockwaves thanks to rising rate worries due to a hawkish Fed. The Fed enacted a 50-bp rate hike in early May after a 25-bp hike in March.

This along with the Russia-Ukraine war and global growth concerns were the concerns in the month. The S&P-based (SPY - Free Report) was down 0.6%, the Dow Jones based (DIA - Free Report) retreated 0.2% and the Nasdaq-based (QQQ - Free Report) declined more than 3.6% in the past one month (as of May 31, 2022).

For the most part of the month, the indexes were downbeat. Wall Street finally ended its seven-week losing streak last week. The S&P 500 recorded its best week since November 2020. All indexes were up more than 6% each last week, helping the month of May end on a decent mode.

Let’s take a look at the ETF asset report for the month.

S&P 500 Win

iShares Core S&P 500 ETF (IVV - Free Report) , SPDR S&P 500 ETF Trust (SPY - Free Report) and Vanguard S&P 500 ETF (VOO - Free Report) amassed about $7.39 billion, $5.11 billion and $3.59 billion in assets in May. Corrections in valuations probably led the S&P 500 to garner investors’ attention in the month (read: What You Need to Know About S&P 500 ETF Investing Right Now).

U.S. Short-Term Treasuries Back in Fashion

Vanguard Short-Term Bond ETF (BSV - Free Report) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) added about $3.27 billion and $2.83 billion in assets, respectively last month. We believe cash and short-dated fixed income play a greater role in adding stability to a portfolio. This is especially true given that the Fed will keep on hiking rates this year and short-term bond yields will rise alongside.

Bank of America expects the Federal Reserve to raise U.S. interest rates to 3% by early next year from the current level of 0.75% to 1.0%, the WSJ article noted. That would result in a similar rate for cash-like assets such as money-market funds.

High-Yield Products Are Also in High Demand

iShares Core High Dividend ETF (HDV - Free Report) (yields 3.09% annually) andiShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) (4.41% annually) fetched in about $2.85 billion and $2.47 billion in May, respectively. High dividend is a great attraction for investors in the current edgy market.

Muni Bond ETFs Win

iShares National Muni Bond ETF (MUB - Free Report) amassed about $3.88 billion in assets in the month. The underlying ICE AMT-Free US National Municipal Index of the fund measures the performance of the investment-grade segment of the U.S. municipal bond market & there were 8,274 issues in the index. The index includes municipal bonds from issuers that are primarily state or local governments or agencies such that the interest on the bond is exempt from U.S. federal income taxes.

Financials Redeemed Assets

Financial Select Sector SPDR Fund (XLF - Free Report) has seen $3.8 billion in assets flowing out of the fund. The flattening yield curve has led to this move. The benchmark U.S. treasury yield started the month with 2.99% while it ended the month on 2.85%. In early-May, the yield hit a high of 3.12%. On the other hand, the 6-month U.S. treasury bond yield started May at 1.49% and ended at 1.64%. This resulted in a flattening yield curve, which is a headwind for the financial stocks.

Dividend Aristocrats Out of Fashion

SPDR S&P Dividend ETF (SDY - Free Report) , which measures the performance of the highest dividend-yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years, lost about $2 billion in assets in May.

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