April Flash Flows: A Spring Setback Prompts De-Risking

By:

Head of SPDR Americas Research

Bonds have now posted losses in five consecutive months, their longest losing streak since 1994. With stocks also declining in April, traditional portfolios remain under pressure, with a 60/40 allocation down double digits. With such negativity, investors sought to de-risk in April.

Hope springs eternal is a proverb as old as time, and it speaks to human nature always trying to find a fresh cause for optimism. With both stocks and bonds down double digits so far this year, leading to the 60/40 portfolio’s -11.48% return,1 investors have to dig deeper this spring to find any green shoots of optimism.

The return of unnerving episodic volatility has complicated this search for optimism. For instance, over the past three months the S&P 500 Index has moved up or down by 1% 35 times.2 This ranks in the 95th percentile dating back to 1956. The S&P 500 Index also has fallen below its 200-day moving average six times over the past three months3 – the second-most ever in a 90-day period.

In response to the negativity, ETF investors began de-risking.

Record Flows Halted

Last month ETFs had $10.5 billion of outflows, ending a record-setting 34-month streak of inflows when they took in $1.8 trillion of assets. The previous inflow record of 33 months was set in 2013. But during that record run, flows totaled just $440 billion – underscoring how the ETF market has grown in recent years.

Equity funds led April’s outflows. As shown in the chart below, April’s $20.3 billion outflow narrowly missed equities’ worst-ever $20.8 billion outflow in May 2019. US equities’ $27 billion in outflows – their worst ever – drove equities’ near record outflows.

ETF and Equity ETF Monthly Fund Flows

ETF and Equity ETF Monthly Fund Flows

There are also weak trends beneath the surface. For instance, only 59% of all ETFs had inflows last month, compared to a typical historical median of 64%. It was not just equity funds driving April’s depth rate lower; just 61% of fixed income funds had inflows last month. This is well below their historical median of 76%. In fact, not one of the eight major categories where we track depth had a hit rate above its long-term median.

Weak headline flows (near record-setting and streak-busting) combined with weak depth of flows create a scenario of subpar magnitude, breadth, and trend. Taken together, this definitely points to a period of below-average sentiment and investors de-risking in an uncertain market environment.

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Footnotes

Based on the return of the MSCI ACWI Index and the Bloomberg US Aggregate Index per Bloomberg Finance L.P. as of April 30, 2022.
2 Based on the S&P 500 Index per Bloomberg Finance L.P. as of April 30, 2022.
3 Based on the S&P 500 Index per Bloomberg Finance L.P. as of April 30, 2022.
4 Based on SPDR Americas Research calculations of funds with a 2022 full-year performance figure.
5 Based on the return for the S&P/LSTA Leverage Loan Index, the ICE BofA US High Yield Index, and the Bloomberg US Aggregate Index per Bloomberg Finance L.P. as of April 30, 2022.
6 Based on the return of the MSCI ACWI Index and the Bloomberg US Aggregate Index per Bloomberg Finance L.P. as of April 30, 2022.

Glossary

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

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

ICE BofA US High Yield Index
The ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.

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

MSCI Emerging Markets Index
A market-capitalization-weighted stock market index that measures the stock performance of the companies in 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.

S&P/LSTA Leverage Loan Index
A market value-weighted index designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments.

April Flash Flows: A Spring Setback Prompts De-Risking

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