Why Did ETF Flows Pause Last Week?



Weekly outflows were $3.4 billion

After eight weeks of continuous inflows, ETF flows faltered last week despite positive momentum in the markets. FactSet data showed that investors pulled out $3.4 billion during the week. As of last week, the inflows are $119.7 billion year-to-date. The outflows were led by US equity (JPM) (GS) (BAC) with net redemptions of $1.8 billion. International equity continued to see redemption pressure with net outflows of $911 million. US fixed-income ETFs had positive inflows of $1.43 billion, while international fixed-income had net redemptions of $883 million.

Fixed-income ETFs topped the chart

Fixed-income ETFs topped the inflows chart last week. The Schwab U.S. TIPS ETF (SCHP) and the Schwab Intermediate-Term U.S. Treasury ETF (SCHR) saw inflows of $1 billion and $810 million, respectively. The Vanguard Mortgage-Backed Securities ETF (VMBS) and the iShares 20+ Year Treasury Bond ETF (TLT) also saw healthy inflows.

The biggest outflows were concentrated in some of the top equity ETFs in the country. The SPDR S&P 500 ETF Trust (SPY) saw the highest net redemption of $2 billion followed by the Invesco QQQ Trust (QQQ) with outflows of $1.34 billion. The SPDR Gold Trust (GLD) saw outflows of $592 million even though gold prices rose marginally during the week.

Upcoming events

The Fed’s much-awaited decision on the interest rate movement is scheduled to be announced this week. The Fed is expected to increase its benchmark lending rate 0.25% to 1.75%–2.0%. The US is also scheduled to release the inflation rate and retail sales data for May.

The world will be eagerly watching the US-North Korea summit on June 12. The Bank of Japan and the European Central Bank are scheduled to announce their interest rate decision. China and the United Kingdom are scheduled to report their inflation rate for May. The United Kingdom is also scheduled to report the unemployment rate for April.

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