The exchange traded fund universe has attracted over $1 trillion in assets, but growth has tapered off as market volatility crippled the outlook on stocks last year. Still, with the economy and markets on the mend, the ETF industry could see $2 trillion by the end of the year.
Currently, low market volume has some speculating that a lot of cash is still sitting on the sideline. Investors, discouraged from the high volatility in equities, have moved money out of stocks and into bonds or cash holdings. Once the investors feel more comfortable, we might see a surge in market interest. [Why is ETF Trading Volume Down?]
ETFs offer quick and easy access to a multitude of asset classes, and they have become a preferred method of market exposure for both institutional and the average retail investors.
“Investors definitely sense the improvement in the global macro picture and need their quick sugar high exposure to equities,” Brian Stutland of Stutland Equities said in a CNBC report. “Thus, rather than figure out which stock to pick in a sector, they can just bang out exposure to oil, gold, emerging markets, industrials, etc.”
“Pros are using the ETF space to quickly trade in areas that used to be tougher to trade in, i.e., foreign currencies,” Michael Murphy, president of Rosecliff Capital, said.