On the flipside, iShares Barclays 1-3 Year Treasury Bond Fund (NYSEArca: SHY) saw about $1 billion leave the fund, which is likely a reflection of institutional players moving out of short term Treasuries and back into equities. Despite the strength last week however in equities, both iShares Russell 2000 (NYSEArca: IWM) and SPDR S&P 500 (NYSEArca: SPY) saw assets vacate the funds via redemption activity, with a total of about $1.5 billion leaving the two funds collectively.
Vanguard Emerging Markets (NYSEArca: VWO) also took in net assets last week, accumulating nearly $700 million, and since this ETF is designed to track the MSCI Emerging Markets Index and has notable exposure to the BRIC economies (Brazil, Russia, India, and China), these flows can be conveyed as a bullish indicator for what many see as a downtrodden asset segment.
In the trailing one year period, the MSCI Emerging Markets Index is down 17.94% versus the S&P 500, which is roughly flat (-0.22%), so with U.S. domestic markets challenging recent highs lately, it seems apparent that those with a greater risk appetite are looking for opportunities to snag bargains in the emerging markets. If you go out five years and examine trailing returns, the MSCI EM Index is up 5.54% versus the SPX down 9.92%, so perhaps these buyers are simply sizing up an opportunistic longer term buying opportunity at this juncture.
Vanguard Emerging Markets
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Full disclosure: Tom Lydon’s clients own SPY.