There is about $1.3 trillion held in ETFs listed in the U.S.
“Dividend-weighted funds have continued to catch on, as the current quarter’s money flows prove. Some $2 billion of new capital have flowed into such products in the third quarter, or 4% of the total,” Colas said.
The strategist predicts ETF assets will “explode” in the fourth quarter to surpass the inflows seen in the third quarter.
“The largest driver of this expansion will be investors who wish to lock in the tax treatment of capital gains according to 2012’s regulations, rather than roll the dice on what may come in 2013 and future years,” Colas wrote. “Where these investors put the proceeds of such sales will be interesting to watch, and recent history seems to point to a lot of that capital ending up in ETFs. What point on the risk spectrum these asset owners will choose is the real wild card.”