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October ETF Asset Report: U.S. Gains; REIT Loses

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After a moderate Q3, it might be wise to look at investors’ perception of the ETF industry in the first month of fourth-quarter 2016. Overall, Fed hike bets, talks of diminishing stimulus in various developed market central banks and Q3 earnings pulled the strings on the bourses.

Let’s take a look at the corners that were the hot favorites of investors and those that were cast out. The data is as per till October 26, 2016. Our study concludes that several broader U.S. equity ETFs were the star performers in terms of asset gathering as these saw maximum inflows while the rate sensitive corners were the laggards.


S&P 500 – iShares Core S&P 500 ETF IVV

Better earnings season, U.S. economic recovery, higher chances of Hillary Clinton’s victory in the upcoming election and the return of risk-on sentiments in the market, albeit less, probably put the S&P 500 on investors’ radar (read: Buy These ETFs as BlackRock Cuts Fees).

Notably, as per the Earnings Trends report issued on October 26, 2016, earnings growth of the S&P 500 in Q3 is expected to be 1.4% on 1.4% higher revenues. SPDR S&P 500 ETF Trust SPY also grabbed about $997.3 million in assets (read: Tired of Caution? Here is A Bullish Case of S&P 500 ETF Investing).

Nasdaq – PowerShares QQQ QQQ

The technology sector has been in the spotlight lately on better earnings and compelling valuation. This increased investors’ lure for the tech-heavy Nasdaq ETF QQQ which took the second rank. QQQ hauled in about $1.32 billion in the month.

Emerging Market –Vanguard FTSE Emerging Markets ETF (VWO - Free Report)

Growth issues were mainly with the developed markets while emerging markets (EM) equities were relatively well poised.  Accommodative developed market central banks, which have kept interest rates low for long, bolstered demand for higher-yielding emerging market securities. Probably this is why VWO amassed about $1.20 billion in assets (read: 3 Top Performing Emerging Market ETFs of Q3).

High-Yield Bonds – iShares iBoxx $ High Yield Corporate Bond ETF HYG

An uptick in oil prices in October did a lot to draw investors’ attention toward the junk bond ETF space. This is because of the fact that the U.S. energy companies are closely tied to the high-yield bond market, with the former comprising a considerable portion of junk bond issuance.

Plus, Fed rate hike worries led many investors to park their money in junk bonds in search of higher yields. Thanks to this trend, HYG, a popular junk bond ETF added over $1.16 billion in assets in the month (read: Junk Bond ETFs--Unfortunate Victims of the Oil Crash?).


Low-Volatility – iShares Edge MSCI Minimum Volatility USA ETF USMV

As investors poured money into relatively riskier securities, low volatile stocks and ETFs fell out of investors’ favor. Probably this is why, USMV saw $819.5 million in assets oozing out.  

REIT – Vanguard REIT Index Fund VNQ

Strengthening bets over a Fed rate hike by this yearend marred the appeal for rate-sensitive sectors like real estate. As a result, VNQ and iShares U.S. Real Estate ETF IYR saw about $700.7 million and $699.4 million in assets gushing out, respectively.

U.S. Treasury – iShares 20+ Year Treasury Bond ETF TLT

As expected, the likely Fed policy tightening has jeopardized other rate-sensitive corners.  As bond yields rose on Fed hike bets, investors shied away from the U.S. Treasury. TLT shed about $674.8 million in assets from the fund.  

Consumer Staples – Consumer Staples Select Sector SPDR Fund XLP

This was yet another victim of rising rate fears as the fund yields around 2.47% annually. Plus, food price deflation anda strengthening U.S. dollar pose threats to several large-cap consumer staples’ stocks as these companies have significant international market exposure. XLP saw a net exodus of about $597 million in assets(read: Is a Consumer Staples ETF Rebound Around the Corner?)

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