Fixed Income & U.S. Equity ETFs Shine In Mid-Term Week


Last week, the mid-term election outcome lifted the stock market with both the Dow Jones and the S&P 500 logging in the biggest post-midterms gain since 1982. Investors cheered the gridlock in Washington as Democrats won control of the House while Republicans maintained a majority in the Senate. The outcome has returned the allure for riskier assets.

However, a weak Chinese data, ongoing U.S.-China trade war and a decline in oil price raised concerns about global growth and in turn made investors cautious again.

Against such a backdrop, ETFs, overall, gathered about $13.7 billion capital last week, with the U.S. fixed income ETFs leading the way higher with $6.5 billion inflows, closely followed by $4.4 billion in U.S. equity ETFs and $2.5 billion in international equity ETFs, per etf.com.

Fixed Income ETFs: A Sweet Spot

After registering their first monthly outflow in three years in October, fixed income ETFs regained their appeal last week. In particular, high yield bond ETFs like iShares iBoxx USD High Yield Corporate Bond ETF (HYG – Free Report) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK – Free Reportsaw a resurgence in investors’ interest. The products accumulated $1.1 billion and $651 million, respectively, last week. HYG has a Zacks ETF Rank #5 (Strong Sell) while JNK has a Zacks ETF Rank #4 (Sell).

Other bond ETFs like iShares 1-3 Year Treasury Bond ETF (SHY – Free Report)iShares 3-7 Year Treasury Bond ETF (IEI – Free Report) and iShares Core U.S. Aggregate Bond ETF (AGG – Free Report) saw weekly inflows of more than $625 million each. SHY offers exposure to short-term U.S. Treasury bonds while IEI provides exposure to intermediate-term U.S. Treasury bonds. Both the products have a Zacks ETF Rank #4. AGG offers broad exposure to U.S. investment-grade bonds.

U.S. Equity ETFs Rocks

SPDR S&P 500 SPY was the most loved ETF gathering $1.3 billion in its asset base last week. This was followed by inflows of $667 million for SPDR Dow Jones Industrial Average ETF Trust (DIA – Free Report), $666 million for Industrial Select Sector SPDR Fund (XLI – Free Report) and $578 million for Vanguard S&P 500 ETF (VOO – Free Report). These funds have a Zacks ETF Rank #2 (Buy). SPY and VOO track the S&P 500 Index while DIA follows the Dow Jones Industrial Index. XLI targets the broad industrial sector. These ETFs became popular on the hopes of post-mid-term election rally.

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