February 2018 will be remembered for the brake that the Trump Rally hit after a long and smooth journey. Several market watchers persistently warned of overvaluation and investors have showed amazing patience so far. But the U.S. market crashed to start February.
Increasing inflationary expectations and rising rate fears pushed up bond yields and spurred equity sell-offs. Let’s see how investors reacted to this situation and where they parked their money in February. The data are as of etf.com (as of Feb 26, 2018).
S&P 500 Unfazed by Sell-Offs
Thanks to upbeat earnings, the S&P 500 hauled in considerable assets. This trend benefited S&P 500-based ETFs like iShares Core S&P 500 ETF (IVV - Free Report) and Vanguard S&P 500 ETF (VOO - Free Report) . These attracted about $3.74 billion and $1.38 billion in assets, respectively, in the month.
Developed Foreign Markets Gain Too
Developed international markets too stayed steady and brushed away selloff fears. iShares Core MSCI EAFE ETF (IEFA - Free Report) tracing Europe, Australia and Far Eastbecame the topper with about $6.44 billion inflowswhile Vanguard FTSE Developed Markets ETF (VEA - Free Report) raked in about $1.04 billion.
iShares MSCI Japan ETF (EWJ - Free Report) added about $867.7 million in assets as investors liked cheaper stock valuation, improving corporate earnings and the possible pickup in earnings. Japanese companies are cash rich too. Since companies are sitting on cash piles, Japanese equities offer quality exposure too (read: 4 Reasons Why You Should Look at Japan ETFs Now).
Emerging Markets Not Behind
Since the greenback remained subdued in February, emerging market investments brightened. Apart from this, the fundamentals are pretty pro-growth in emerging markets at the current level unlike in 2013 (famous for taper-tantrum). iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) hauled in about $1.41 million in assets, respectively (read: Will EM & Asia Outperform U.S. ETFs in the Year of Dog?).
Short-Term Treasury Bonds Swell Too
iShares Short Treasury Bond ETF SHV and SPDR Bloomberg Barclays 1-3 Month T-Bill ETF BIL accumulated about $1.1 billion and $973.9 million, respectively, in the month. Since long-term bonds are hurt more in a rising rate environment, investors are inclined on this segment (read: 6 Ways to Build a Rate-Proof Portfolio With ETFs).
High Expense Ratio Funds Lose
Though the S&P 500 and developed markets were investors’ favorites,theS&P 500-based SPDR S&P 500 ETF Trust (SPY - Free Report) (0.09% expense ratio)andEAFE-based fund iShares MSCI EAFE ETF (EFA - Free Report) (0.33% expense ratio)lost about $26.5 billion and $3.76 billion in assets. This is probably why these funds were priced higher than their counterparts like VOO (4 bps in fees) and IEFA (8 bps in fees), respectively.
High-Yield Bonds Lose
High-yield iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD - Free Report) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report) shed about $3.06 billion and $2.58 billion, respectively, in assets in the month on rising rate worries. iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) , which yields about 4.56% annually, also lost about $1.93 billion in assets (read: JP Morgan Launches Emerging Market Bond ETF).
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