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ETF Asset Report of July 2022

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Stocks in the United States and Europe had their biggest monthly increase since November 2020 on upbeat earnings and expectations of slower Federal Reserve monetary tightening. Investors’ hope that slowing inflation and slowing growth may keep the Fed to ease plans to push up interest rates boosted equities throughout the month. Cheaper valuation after a downbeat first-half also aided equities.

The S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000 added 8%, 5.6%, 11.4% and 9.1%, respectively in the past one month (as of Jul 29, 2022). Some earnings came in upbeat to close out the month. Amazon.com Inc. and Apple Inc. both companies beat revenues estimates. In July, Amazon shares gained 27%, their biggest monthly rally since October 2009.

The rally in Wall Street came despite 41-year high inflation, GDP contraction for the second-straight quarter and yet another Fed rate hike worth 0.75%. Against this backdrop, below we highlight a few ETF areas that won in July.

Against this backdrop, below we highlight a few ETFs that fetched sizable assets in July of 2022.

U.S. Treasury Bonds Win

iShares U.S. Treasury Bond ETF (GOVT - Free Report) , iShares 20+ Year Treasury Bond ETF (TLT - Free Report) and iShares 10-20 Year Treasury Bond ETF (TLH - Free Report) amassed about $4.75 billion, $3.72 billion and $2.19 billion in assets in July.

Benchmark U.S. treasury bond yields remained at moderate levels in July as recessionary fears boosted the safe-haven demand for the U.S. treasury bonds. The month started with 2.88% yield and ended at 2.67%, having hit a high of 3.09%. This happened despite the steep Fed rate hikes. Moreover, the Fed has indicated to slow the pace of policy tightening in the coming days. This should keep the rise in long-term bond yields at check and favor bond prices.

Corporate Bonds Rock Too

iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD), iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) and SPDR Bloomberg High Yield Bond ETF (JNK - Free Report) too hauled in about $2.75 billion, $1.93 billion and $1.64 billion in assets, respectively. LQD, HYG and JNK yield 2.68%, 4.59% and 4.94%, respectively.

S&P 500 Gain

Vanguard S&P 500 ETF (VOO - Free Report) and iShares Core S&P 500 ETF (IVV - Free Report) fetched about $3.76 billion and $2.2 billion in assets, respectively. The S&P 500 gained materially in the month.

Short-Term U.S. Treasury Bonds Lose

SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) andiShares Short Treasury Bond ETF (SHV - Free Report) lost about $2.27 billion and $1.71 billion in assets, respectively.

Financials Too Fell Out of Favor

Financial Select Sector SPDR Fund (XLF - Free Report) too lost about $1.08 billion in assets.  Since long-term bond yields remained muted, financial stocks fell out of favor. As banks seek to borrow money at short-term rates and lend at long-term rates, a steepening yield curve earns more on lending and pay less on deposits, thereby leading to a wider spread. This expands net margins and increase banks’ profits.