Exchange traded funds inflows data for the month of October highlights that investors love stocks and their preference continues to lean toward higher-beta sectors.
“Investors have been pumping huge sums into equities in October. Although global equity funds have only about one-third the assets of U.S. equity funds, global equity MFs and ETFs have received $24.5 billion this month, roughly equal to the inflow of $24.6 billion into U.S. equity MFs and ETFs,” according to TrimTabs Asset Management.
TrimTabs points out that combined equity fund inflows this month of $49.1 billion represent the fourth-best month on record and two of the three best inflows months have taken place this year: January and July.
At the sector level, flows indicate investors have preferred high-beta sectors, predominantly consumer discretionary and technology, over less exciting consumer staples and utilities names. [Fund Flows Show Investors Embracing Risk]
“Industrials, Consumer Discretionary, and Information Technology have all received at least 25% of assets this year. The only sectors to post outflows this year have been Consumer Staples, which has redeemed 5% of assets, and Utilities, which has redeemed 6% of assets,” according to TrimTabs.
Although the Consumer Staples Select Sector SPDR (NYSEArca: XLP) turned in a decent performance this month, rising more than 6%, outflows from staples ETFs could be a sign that investors are concerned about elevated valuations in defensive sectors, another possible spike in interest rates or both scenarios. [Playing Defense Isn’t Cheap]
October flows to sector ETFs generally viewed as riskier than staples and utilities tell different stories. However, the consumer discretionary ETFs look mixed. While seasonal trends indicate this is an ideal time to be considering discretionary stocks, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) has lost $116.1 million in assets this month, a number only partially offset by $60.4 million in inflows to the Vanguard Consumer Discretionary ETF (NYSEArca: VCR). [Time to Warm to Discretionary ETFs]
However, TrimTabs is spot-on its assessment of industrials and technology ETFs. The Technology Select Sector SPDR (NYSEArca: XLK) and the Industrial Select Sector SPDR (NYSEArca: XLI) have raked in $496.5 million and $317.1 million, respectively, this month, according to Index Universe data.
U.S. Equity Sector ETF Flows (click to enlarge)
Chart Courtesy: TrimTabs Asset Management