Over the past year, fixed income exchange traded funds have gathered about $53 billion, an indication that most investors have lost faith in the equity market. However, there are reasons to stick to the right allocation of stocks and bonds despite the fear factor.
“In the ETF space, we saw over $120 billion come into ETFs, but $53 billion of that went into fixed-income products. In the mutual fund landscape, the story is even more stark. What we saw is over a $100 billion withdrawal from equity funds, and $170 billion went into mutual funds in the fixed-income space,” Paul Justice, CFA, wrote for Morningstar. [Seasonal Trends May Weigh on Stock ETFs]
According to Thompson Reuters Lipper data, institutional investors are focusing in on safety, and trimming down holdings of U.S. domiciled equity funds, reports Daniel Bases for Reuters. When looked at in isolation, equity ETFs have had net outflows for eleven of the last fourteen weeks. SPDR S&P 500 (NYSEArca: SPY) had the largest net outflow, at $2.9 billion in the prior week.
Morningstar analysts currently think the S&P 500 is fairly attractive on a number of valuation metrics. First, the valuation metrics valued most highly at Morningstar is the Morningstar fair value estimate, which is driven by the equity analysts who cover 465 out of the 500 stocks in the S&P 500, reports Michael Rawson, CFA, for Morningstar. [Stock ETFs: Brief Pullback or Serious Correction?]