We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The present investing scenario across the globe has turned a bit tricky. The U.S. economy is better-positioned, while several other developed economies are lagging. Due to upbeat economic fundamentals, the Fed has embarked on a tighter monetary policy, which in turn has resulted in a stronger dollar and rising Treasury bond yields. Such Fed moves have weighed on emerging market currencies as well as economies.
Meanwhile, there has been an acute political crisis in Turkey due to worries surrounding president Tayyip Erdogan's influence over monetary policy and the country’s a worsening relationship with the United States. The problem is so deep-rooted that it has rattled the global investing world.
As a result, investors yanked money from both stock and bond funds in the past week, and piled that in U.S. equities from safe sectors. Per Bank of America Merrill Lynch, about $3.6 billion was pulled out from equity mutual funds and ETFs, of which $2.6 billion was U.S. equities, as quoted on CNBC.
Thanks to rising rate concerns, investors had to dump government debt. There were net outflows of $1.5 billion from Treasuries and government bonds marking “the biggest since December 2016.” Investors also got rid of gold, which is down $500 million due to a jump in the U.S. dollar.
Fund Managers Overweight on U.S. Equities
All these outflows happened when monthly fund managers’ survey indicated the biggest U.S. equity overweight since January 2015, as quoted on CNBC. Now the question is where did all the money go?
According to Bank of American Merrill Lynch (BofA), some sectors scored high in the past three months, in terms of inflows and all of those were defensive.
Why Defensives Rule?
The past three months were all about trade tensions mainly between the United States and China, Turkey crisis, uncertainty pertaining to central banks’ decisions and emerging market currency crisis. Naturally, investors sought shelter under safe havens.
Health-care stocks hauled in $800 million, leading the sector to see a total of $5.5 billion in inflows for the past three months. The S&P health-care sector has been the top performer so far this quarter. The fund amassed about $872.20 million in assets and was up about 9% past three months (as of Aug 17, 2018).
The U.S. health care supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors. Plus, President Trump’s announcement of the drug plans in May was in the best interest of pharma companies (read: Health Care ETFs Outperforming: Will the Rally Last?).
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
The fund added about $1.15 billion in assets in the past two months (as of Aug 17, 20218). Trade tensions and Turkey crisis boosted this non-cyclical consumer sectors. The fund has been up 10.7% in the past three months too (read: Wal-Mart Blockbuster Q2 Earnings Pushes Consumer ETFs Higher).
This is yet another safe sector. Investors have dumped about $420.04 million in assets in the past two months (as of Aug 17, 2018). The fund is also known for high yields. If has offered benchmark-beating yields of 3.22% over a year as of Aug 17, 2018. The fund has added about 10.7% in the past three months.
The sector underperforms in a rising rate environment. Yield-hungry investors normally have a large appetite for REIT stocks as the U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. As a result, in a rising rate environment, the appeal for this yield gets quelled.
Still the fund added about $646.7 million of assets in the past two months (as of Aug 17, 2018) and has gained about 9.5% in the past three months. This shows investors’ inclination for the safe sectors. After all, an improving U.S. economy should bode well for real estates. The fund yields about 4.23% annually.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 Sector ETFs Brimming With Inflows
The present investing scenario across the globe has turned a bit tricky. The U.S. economy is better-positioned, while several other developed economies are lagging. Due to upbeat economic fundamentals, the Fed has embarked on a tighter monetary policy, which in turn has resulted in a stronger dollar and rising Treasury bond yields. Such Fed moves have weighed on emerging market currencies as well as economies.
Meanwhile, there has been an acute political crisis in Turkey due to worries surrounding president Tayyip Erdogan's influence over monetary policy and the country’s a worsening relationship with the United States. The problem is so deep-rooted that it has rattled the global investing world.
As a result, investors yanked money from both stock and bond funds in the past week, and piled that in U.S. equities from safe sectors. Per Bank of America Merrill Lynch, about $3.6 billion was pulled out from equity mutual funds and ETFs, of which $2.6 billion was U.S. equities, as quoted on CNBC.
Thanks to rising rate concerns, investors had to dump government debt. There were net outflows of $1.5 billion from Treasuries and government bonds marking “the biggest since December 2016.” Investors also got rid of gold, which is down $500 million due to a jump in the U.S. dollar.
Fund Managers Overweight on U.S. Equities
All these outflows happened when monthly fund managers’ survey indicated the biggest U.S. equity overweight since January 2015, as quoted on CNBC. Now the question is where did all the money go?
According to Bank of American Merrill Lynch (BofA), some sectors scored high in the past three months, in terms of inflows and all of those were defensive.
Why Defensives Rule?
The past three months were all about trade tensions mainly between the United States and China, Turkey crisis, uncertainty pertaining to central banks’ decisions and emerging market currency crisis. Naturally, investors sought shelter under safe havens.
Health Care Select Sector SPDR Fund (XLV - Free Report)
Health-care stocks hauled in $800 million, leading the sector to see a total of $5.5 billion in inflows for the past three months. The S&P health-care sector has been the top performer so far this quarter. The fund amassed about $872.20 million in assets and was up about 9% past three months (as of Aug 17, 2018).
The U.S. health care supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors. Plus, President Trump’s announcement of the drug plans in May was in the best interest of pharma companies (read: Health Care ETFs Outperforming: Will the Rally Last?).
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
The fund added about $1.15 billion in assets in the past two months (as of Aug 17, 20218). Trade tensions and Turkey crisis boosted this non-cyclical consumer sectors. The fund has been up 10.7% in the past three months too (read: Wal-Mart Blockbuster Q2 Earnings Pushes Consumer ETFs Higher).
Utilities Select Sector SPDR ETF (XLU - Free Report)
This is yet another safe sector. Investors have dumped about $420.04 million in assets in the past two months (as of Aug 17, 2018). The fund is also known for high yields. If has offered benchmark-beating yields of 3.22% over a year as of Aug 17, 2018. The fund has added about 10.7% in the past three months.
Vanguard Real Estate ETF (VNQ - Free Report)
The sector underperforms in a rising rate environment. Yield-hungry investors normally have a large appetite for REIT stocks as the U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. As a result, in a rising rate environment, the appeal for this yield gets quelled.
Still the fund added about $646.7 million of assets in the past two months (as of Aug 17, 2018) and has gained about 9.5% in the past three months. This shows investors’ inclination for the safe sectors. After all, an improving U.S. economy should bode well for real estates. The fund yields about 4.23% annually.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>