The third quarter was quite a volatile one. Stocks in the United States and Europe had their biggest monthly increase since November 2020 in July but started falling in late August on renewed rising rate worries and recessionary fears. September, too, lived up to its ill-repute.
Overall, the S&P 500, the Dow Jones and the Nasdaq Composite have lost about 6.3%, 7.6% and 5%, respectively, in the past three months (as of Sep 30, 2022). The small-cap index Russell 2000 has lost 3.7%.
Against this backdrop, below, we highlight the ETF asset report for the third quarter (as of Sep 27, 2022).
S&P 500 & Total Stock Market Top
The S&P 500 has fallen into a bear market in the quarter. Still,
Vanguard S&P 500 ETF ( VOO Quick Quote VOO - Free Report) and iShares Core S&P 500 ETF ( IVV Quick Quote IVV - Free Report) added about $10.5 billion and $4.48 billion in assets in the month, respectively. Vanguard Total Stock Market ETF (VTI) has hauled in about $5.89 billion in assets. Cheaper valuation probably has lured investors to focus on the S&P 500 ETFs. U.S. Treasury Bonds Win iShares U.S. Treasury Bond ETF ( GOVT Quick Quote GOVT - Free Report) , iShares 20+ Year Treasury Bond ETF ( TLT Quick Quote TLT - Free Report) and iShares 7-10 Year Treasury Bond ETF ( IEF Quick Quote IEF - Free Report) amassed about $5.74 billion, $6.90 billion and $3.59 billion in assets in Q3. Benchmark U.S. treasury bond yields started the quarter at 2.88%. The yield stood at 3.97% on Sep 27. This happened due to steep Fed rate hikes. Vanguard Total Bond Market ETF ( BND Quick Quote BND - Free Report) , which yields 2.65% annually, has amassed about $3.58 billion in assets. High-Dividend Products in Huge Demand
The rise in interest rates is now common globally as central banks are intending to contain inflation. Hence, investors may be interested in products that have the potential to offer capital appreciation as well as benchmark-beating yields. Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns.
Schwab U.S. Dividend Equity ETF (SCHD) (yields about 3.68% annually) fetched about $3.45 billion in Q3. High dividend is a great attraction for investors in the current edgy market. JPMorgan Equity Premium Income ETF ( JEPI Quick Quote JEPI - Free Report) , which yields as high as 10.85% annually, fetched about $3.33 billion in assets. Gold Loses Its Glitter SPDR Gold Trust ( GLD Quick Quote GLD - Free Report) and iShares Gold Trust ( IAU Quick Quote IAU - Free Report) lost about $5.92 billion and $1.29 billion in assets, respectively. As gold is priced in the greenback and the U.S. dollar is rising fast, non-interest-bearing assets like gold’s demand fell. Small Caps Fall Out of Favor iShares Russell 2000 ETF ( IWM Quick Quote IWM - Free Report) and iShares S&P Small-Cap 600 Value ETF ( IJS Quick Quote IJS - Free Report) witnessedabout $2.77 billion and $1.96 billion in assets gushing out of the funds, respectively. As recessionary fears took the U.S. economy in its grip, small caps (that depends highly on the domestic economy’s wellbeing) probably fell out of investors’ favor. Emerging Markets Underperform Too iShares MSCI Emerging Markets ETF ( EEM Quick Quote EEM - Free Report) lost about $1.87 billion in assets in Q3. Emerging markets normally underperform amid rising greenback and U.S. interest rates. Fed rates are seen at 4.6% by March, which would push up borrowing costs of emerging markets. Debt service for poor nations is expected to rise to a decade high in 2024, per Reuters. Plus, China’s COVID lockdown issues crippled the demand for EEM in Q3.