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August Flash Flows: The Show Goes On

By:

Head of SPDR Americas Research

  • ETFs took in $72 billion in August, their 10th month in a row with over $50 billion, pushing flows over the past 12 months over $800 billion for the first time ever.
  • Led by defensives, sector funds had $7.3 billion, their 11th month in a row with inflows (tying a record). Quality factor ETFs took in $1.4 billion, their fifth-most ever.
  • Bond ETFs added $20 billion in August, with only two sectors posting outflows. TIPS and Bank Loan ETFs took in the most flows as percent of assets (4%).

Global equities registered their seventh month in a row with gains, their longest stretch since 2018, and have now gone 217 days without being in a 5% drawdown — the third-longest streak ever.1

Given this strong momentum, markets appear to be weathering a confluence of macro risks that perhaps intuitively should have created a bit more off-screen turmoil: multiple hurricanes knocking large portions of the US off-line, increased tensions in the Middle East, softening economic data as measured by the continued decline in the CITI Global Economic Surprise Index, Federal Reserve taper talks, and the continued increase in COVID-19 cases leading to the approval of booster shots.

Like an ensemble television show that loses a key cast member, the market has adjusted. The 1990s NBC hit ER didn’t slow down after George Clooney left, the sentimental 1960s sitcom Bewitched swapped one Darrin with another, and Kirstie Alley seamlessly replaced Shelley Long on the 1980s hit Cheers. Like them, no matter what, this market’s show goes on.

Flows Top $800 billion over the last 12 months

With global capital markets rallying, investors continued gravitating toward ETFs at a record pace to deploy capital and position portfolios. The $72 billion of inflows in August marks the 10th month in a row where ETFs have taken in over $50 billion. This has pushed total 2021 flows to within $8 billion of the never-before reached $600 billion mark for a calendar year.

Based on these flow totals, our five-factor composite model estimate2 for full-year 2021 figures now increases from $797 billion to $820 billion — a level, that if reached, would be 62% higher than 2020’s record $505 billion.

While we will have to wait four more months to see if this outlook is accurate, there is already a 12-month time period where flows have surpassed $800 billion. On a rolling 12-month basis, as shown below, flows are $816 billion. This is a record for any 12-month stretch.

Rolling Fund Flow Totals ($ Billions) 

Rolling Fund Flow Totals ($ Billions)

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Footnotes

Bloomberg Finance L.P., as of August 31, 2021. Based on the MSCI ACWI Index.
Trailing 12-month average, trailing 36-month average, quarterly average figure for historical Q3 and Q4 to reflect seasonality, average Q3 and Q4 figure that also includes the increase that Q1 and Q2 2021 had versus their historical average to account for cyclicality but also the current 2021 pace, 2021 average

Glossary

S&P 500® Index
A market-capitalization-weighted stock market index that measures the stock performance of the 500 largest publicly traded companies in the United States.

MSCI ACWI Index
MSCI ACWI Index is a market capitalization-weighted index designed to provide a broad measure of equity market performance throughout the world.

MSCI USA Quality Index
The index aims to capture the performance of quality growth stocks by identifying stocks with high quality scores based on three main fundamental variables: high return on equity (ROE), stable year-over-year earnings growth and low financial leverage.

S&P/LSTA Leveraged Loan 100 Index
Designed to reflect the performance of the largest facilities in the leveraged loan market.

ICE BofA US High Yield Index
A market capitalization weighted and is designed to measure the performance of U.S. dollar denominated below investment grade (commonly referred to as “junk”) corporate debt publicly issued in the U.S. domestic market.

Bloomberg Barclays US Aggregate Bond Index
A broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.

Growth
Characterized by higher price levels relative to fundamentals, such as earnings.

Value
Characterized by lower price levels relative to fundamentals, such as earnings.

Quality
Characterized by firms with strong balance sheets and high profitablity.

Smart Beta
A term for rules-based investment strategies that don’t use conventional market-cap weightings.

Originally Posted on September 7, 2021 – August Flash Flows: The Show Goes On

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