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September Flash Flows: Flows Remain Strong Amid the Market’s Fall

By:

Head of SPDR Americas Research

  • Undeterred by the market’s decline, ETFs took in $46 billion in September, their 10th month in a row with over $40 billion in inflows.
  • Equity ETFs outpaced bond ETFs for the 11th month in a row, taking in $18 billion more in September and sector ETFs set a record streak of 12 months in a row with inflows.
  • Positioning remained consistent within bond ETFs. Treasury Inflation-Protected Securities (TIPS) funds took in $3 billion, their 17th month in a row with inflows, and Bank Loan funds added nearly $1 billion.

Right on cue with the weather starting to change in the Northeast, the market’s direction changed in September. Heading into the month, roughly 70% of the firms in the S&P 500 Index were trading above their 50-day moving average. Thirty days later, only 25% of firms are above that threshold, and the broad benchmark’s relative strength measure declined every day in the last the week of month.

Compounding the negative returns in stocks, core global bonds also fell hard. In fact, after posting a 1.8% decline in September, their sixth month of losses in 2021, the year-to-date return fell to a negative 4.1%.1 If the year ended today, this would be the worst yearly decline from core global aggregate bonds since 1999.

Yet, despite the weak returns, investors’ risk-on positioning has not been severely altered.

Flows Ready to Keep Breaking Records This Fall

ETFs are smashing records like punk teenagers smashing pumpkins once the sun goes down. Fund flows are already above prior-year highs, and with the fourth quarter typically representing the largest flows of any quarter ($128 billion versus $88 billion for Q4 versus Q1 to Q3 averages) the full-year figures are likely to increase. In fact, our five-factor model now indicates flows could reach $812 billion, or 61% higher than 2020’s record $505 billion. An uptick not unlike the increase in hearing “Happy Fall Y’all” nowadays.

These record-setting flows have been fueled by record-setting participation from all ETFs. Out of the ETFs this year that have witnessed flows (positive or negative), 67.5% have registered inflows. This marks the largest rate of participation in the past ten years.

Beyond the record-breaking flows, the trends shown below indicate both broad-based depth and persistency — a strong sign for ongoing secular adoption of ETFs within portfolios from a diverse group of investors with differing motivations.

Percent of Funds with Inflows Per Month

Percent of Funds with Inflows Per Month

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Footnotes

Bloomberg Finance, L.P. as of September 30, 2021 based on the return of the Bloomberg Global Aggregate Bond Index.

Glossary

Bloomberg Global Aggregate Bond Index
A broad-based flagship benchmark that measures the investment grade, global fixed-rate taxable bond market.

MSCI ACWI Index
A market-capitalization-weighted stock market index that measures the stock performance of the companies in developed and emerging markets.

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.

Originally Posted on October 7, 2021 – September Flash Flows: Flows Remain Strong Amid the Market’s Fall

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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 September 30, 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.

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