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Category ETF Flows: Gold and Bonds in a Classic ‘Risk-Off’ Flow Scenario

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Gold sees strong inflows

If we analyze the top ten ETF inflows and outflows within the Market Realist universe, we can see a “risk-off” fund flow picture that goes hand in hand with the much-discussed NFP (non-farm payroll) miss on Friday, June 3, 2016.

Gold, which is traditionally considered a “safe-haven asset,” jumped by 2.75% on the same day. Naturally, the SPDR Gold Trust (GLD) posted a similar gain of 2.78% on trading volume, which was higher than the 30-day rolling average. The jump in GLD was supported by the largest inflows within our ETF universe.

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Risk-off mode in equities

Conversely, large outflows from of the SPDR S&P 500 ETF (SPY) signal a risk-off mode on an equity level, while the second-largest outflows seen in the iShares iBoxx $High Yield Corporate Bond ETF (HYG), demonstrate a risk-off sentiment on the credit level.

Notably, as expectations of a Fed rate hike were pushed back, US government bond yields dropped on Friday, June 3. The decline in yields led to fund outflows in bond ETFs such as the iShares Short Treasury Bond ETF (SHV) and the iShares 7–10 Year Treasury Bond ETF (IEF).

   

Our Market Realist category fund flows show, to a large extent, the same picture. But one theme becomes more visible when examining the inflow chart (above): large inflows were seen in real estate ETFs as investors reallocated their money from now lower-yielding Treasury bonds to real estate ETFs such as the iShares US Real Estate ETF (IYR), which posted a gain of 0.9% on Friday, June 3.

In the next and final part, we’ll broaden our perspective for the global picture.

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