Emerging market equity ETP flows ascended to a new monthly height of $11.7bn in December, helping the category achieve its record setting year. Broad emerging markets ETPs ended the year on a seven month inflow streak, illustrating sustained investor appetite for the high growth potential these countries can provide.
So what do last year’s flows tell us about the future of ETP usage and areas of growth? We think there are three key takeaways.
First, while the prolonged low interest rate environment persists, we expect to continue to see pronounced flows into equity income and higher yielding fixed income categories. This also means a continued aversion to US Treasuries, as even a modest increase in yields would have a significantly negative impact on Treasury prices.
Second, with the problems of the developed world far from over, we’d expect to see continued interest in investments outside the US, particularly in the emerging markets category. And third, while global growth is likely to surpass US growth this year, US companies with exposure to the greater global economy will likely still benefit, which could mean good news for US large and mega cap equities.
Dodd Kittsley, CFA, is the Head of Global ETP Market Trends Research for BlackRock.