Index ETFs: Inflows across the Board Support US Equity Rally



Major US equity index ETFs see inflows

Investors poured big money into US equities last week. In total, ~$5.4 billion flowed into the four major US equity index ETFs (SPY)(IWM)(QQQ)(DIA). These inflows brought back 80% of the capital investors pulled out the week after “Brexit Friday,” strongly reminding us of the ever-present “buy-the-dip” mentality.

As you can see in the chart above, SPDR’s S&P 500 ETF Trust (SPY) was last week’s investor darling. Net inflows totaled ~$3.5 billion, making up ~65% of the total inflows into the big four US equity index ETFs. More significantly, SPY also took the number-one spot within the entire ETF universe, suggesting that global investor sentiment remains favorable for US equities in the post-Brexit world. In terms of performance, SPY locked in a weekly gain of 1.3%, largely driven by a strong non-farm payrolls report on Friday. Given that the broad-market ETF closed only ~1 point below its June 2015 high, last week’s inflows become even more significant as investors added to positions instead of reducing holdings at the current extremes.

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The high-beta iShares Russell 2000 ETF (IWM) came in second, attracting ~$1.3 billion in capital, while the technology-focused PowerShares QQQ Trust (QQQ) saw inflows of ~$590 million. SPDR’s Dow Jones Industrial Average ETF Trust (DIA) saw comparatively insignificant inflows, but it finished last week in positive territory as well. Perhaps this result reflects investors’ anxiety to own internationally exposed large-cap companies such as McDonald’s (MCD) or Coca-Cola (KO),  given the still elevated volatility in the foreign exchange market.

In Part 2 of this series, we’ll take a look at last week’s GICS sector ETF flows.


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