Risk appetite in global financial markets is gradually increasing with investors targeting developed markets and funneling money into equity-based exchange traded funds.
U.S. ETFs saw $41 billion in inflows over the past four weeks, recouping the $40.2 billion in outflows in the previous month, Bloomberg reports. Global equity ETFs have attracted $15.3 billion in assets over the first 11 days of March.
After touching a fourth-month low on Feb. 4 on emerging market woes and global growth concerns, the MSCI All-Country World Index has increased 5.8%. The MSCI index also touched its highest level since 2007 this month, showing strength despite concerns about U.S. retail sales and housing data during the exceptionally harsh winter.
“Dwindling outflows show investors regaining confidence that the global economy is going to grow,” Joseph Quinlan, the chief market strategist at Bank of America Corp.’s US Trust, said in the article. “When you look at growth in the US, this is emblematic of one economy pulling other economies along.”
Meanwhile, Federal Reserve Chair Janet Yellen has maintained tapering in the bond purchasing program as the economy gradually strengthens.
“If there’s a significant change in the outlook, certainly we would be open to reconsidering,” Yellen said in testimony to Senate Banking Committee on Feb. 27.
Looking overseas, investors threw $448.8 million into international equity ETFs, notably into Japanese, Italian and Spanish stocks. On the other hand, emerging market funds saw $12.1 billion in outflows, more than doubling total redemptions of $5.6 billion for all of 2013, as economists predict slowing growth in the developing world. [EM ETFs Experience Heavy Redemptions in Risk-Off Environment]
“It is clear that developed markets will pull along the developing markets,” Quinlan added. “We haven’t hit the bottom with emerging markets. Investors are expecting them to get cheaper and want them to get cheaper before they take on that risk. They’re also looking for more stability over there.”
For more information on the ETF flows, visit our ETF performance reports category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.