What a difference 31 days can make. In my last post on month-end trends in exchange traded product (ETP) flows, I wrote that investor sentiment in April had cooled, giving way to a significant slowdown in global ETP inflows (a mere $9.2 billion, versus the average $23.2 billion of monthly inflows experienced in the first quarter of this year).
Discouraged by less positive economic growth forecasts, investors seemed to be backing off from the market – and those that did participate acted in a decidedly risk-off manner.
Apparently this cautionary period was only temporary as May flows painted a much more confident picture.
Despite a last-minute dip, ETP inflows in May finished the month at $26.5 billion, up substantially from April’s number.
And while April’s subdued activity wasn’t enough to knock ETP flows off their record-setting pace for the year, May flows certainly added fuel to the fire: Year-to-date, ETP flows are up 24% over the same time period last year – plus, they’ve broken through the $100 billion mark.
Source: BlackRock ETP Research and Bloomberg.
So what exactly was tempting investors back into the market in May? It seemed that economically-sensitive investments were the order of the month. Equity funds took the lead with $26.9 billion, or >100% of inflows for the month. We saw a significant shift away from defensive sectors and into cyclical ones, while investors continued to trim gold exposure in the face of more moderate inflation expectations.