When the market is moving on negative headlines like Friday’s ugly nonfarm payrolls report, ETF trading tends to surge. [Treasury ETFs Continue Screaming Higher After Dismal Jobs Report]
“When the percentage of ETF trading in markets pops, a lot of it is people putting on trades to hedge bets. It’s not buy-and-hold,” Hempstead said.
This phenomenon is one of the most important ways that ETFs have changed the way investors trade the market.
The 2008 financial crisis “showed the benefits of ETFs as institutions looked for liquidity,” said Trumbull at State Street.