Recent buying patterns in exchange traded funds show investors are pulling money from stock ETFs while committing new funds to defensive areas of the market.
“Defensive flows kept receiving healthy inflows during last week as investors sail choppy seas,” Deutsche Bank said in a report sent Wednesday.
Within the long-only category of exchange traded products, equity funds saw outflows of $625 million for the week ended Sept. 9, while fixed income and commodity ETPs registered inflows of $1.2 billion and $928 million, respectively.
“In general, equity defensive sectors (+$988 million), fixed income investment grade (+$637 million), commodity gold (+$619 million), and equity dividend (+$200 million) remain the favorite defensive trades during last week,” Deutsche Bank analysts wrote. [ETF Redemptions Highest Since 2008]
They also pointed out the “unusually large” inflow to ETFs tracking the U.S. healthcare sector. [ETF Chart of the Day: Healthcare]
“We believe that the current underlying trend governing the equity market (i.e. risk off trade) and the relative valuations within the main three defensive sector ETFs — Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP), Utilities Select Sector SDPR Fund (NYSEArca: XLU) and Health Care Select Sector SPDR Fund (NYSEArca: XLV) — suggest that last week’s flows could be the beginning of a sector rotation within defensives,” Deutsche Bank said. [ETF Spotlight: Healthcare]
Health Care Select Sector SPDR Fund
