- 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)
1 Bloomberg Finance L.P., as of August 31, 2021. Based on the MSCI ACWI Index.
2 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
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.
Characterized by higher price levels relative to fundamentals, such as earnings.
Characterized by lower price levels relative to fundamentals, such as earnings.
Characterized by firms with strong balance sheets and high profitablity.
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
The views expressed in this material are the views of the SPDR Research and Strategy team and are subject to change based on market and other conditions. It should not be considered a solicitation to buy or an offer to sell any security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. There is no representation or warranty as to the current accuracy of such information, nor liability for decisions based on such information. Past performance is no guarantee of future results.
Unless otherwise noted, all data and statistical information were obtained from Bloomberg LP and SSGA as of August 31, 2021. Data in tables have been rounded to whole numbers, except for percentages, which have been rounded to the nearest tenth of a percent.
The research and analysis included in this document have been produced by SSGA for its own investment management activities and are made available here incidentally. Information obtained from external sources is believed to be reliable and is as of the date of publication but is subject to change. This information must not be used in any jurisdiction where prohibited by law and must not be used in a way that would be contrary to local law or legislation. No investment advice, tax advice, or legal advice is provided herein.
Investing involves risk including the risk of loss of principal.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.
Concentrated investments in a particular sector or industry tend to be more volatile than the overall market and increases risk that events negatively affecting such sectors or industries could reduce returns, potentially causing the value of the Fund’s shares to decrease.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from State Street Global Advisors and is being posted with permission from State Street Global Advisors. The views expressed in this material are solely those of the author and/or State Street Global Advisors and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.
Disclosure: Tax-Related Items (Circular 230 Notice)
The information in this material is provided for informational purposes only and does not constitute tax advice and cannot be used by the recipient or any other taxpayer to avoid penalties under any federal, state, local or other tax statutes or regulations, or to resolve any tax issue.