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GICS Sector ETF Flows: Healthcare and Financial ETF Flows

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Healthcare: Large inflows reflect “risk-off” sentiment

Zooming in on the GICS Sector ETF’s flows, investors continued to pile the most money into the Health Care Select Sector SPDR Fund (XLV). These flows go hand-in-hand with the broader “risk-off” sentiment in US equity markets seen towards the end of the last trading week. Why? The ETF’s defensive nature makes it less sensitive to Market swings—seen in its relatively low weekly raw-beta to SPY over the past five years (0.8). Also, consider that Johnson & Johnson (JNJ) and Pfizer (PFE) make up nearly 20% of XLV. They consistently made new highs this year. This added momentum to the sector.

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Financials don’t look good

The Financial Select Sector SPDR Fund (XLF) was hit the hardest during the last trading week. It lost almost 1.5%. The corresponding fund outflows underline investors’ concern as more than $350 million was taken out. Even though XLF is only down marginally year-to-date, a continued low-yield environment places pressure on financial companies’ profit prospects. Also, consider that the interest rate–sensitive banking sector makes up 34% of the ETF. Companies like JPMorgan Chase (JPM) and Wells Fargo (WFC) account for 15.8% of the ETF’s entire 93-name portfolio.

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