Recent selling in U.S. equity-based ETFs could be a red flag for the rally as some investors lock in profits.
U.S. stock ETFs have seen outflows of $5 billion over the past month as “capital has been leaving this particular piece of the ETF ecosystem,” says ConvergEx Group chief market strategist Nicholas Colas.
He watches ETF flows because they have been a better market indicator than buying patterns in mutual funds the past year.
For example, the S&P 500 is up 25.8% over the past 12 months. However, investors in U.S. mutual funds which focus on domestic stocks have pulled a whopping $188 billion in assets from these products.