Last year, global exchange traded products hauled in a record $247.3 billion, topping $200 billion for the second consecutive year.

Flows to U.S. ETFs and ETNs dominated at a combined $190.5 billion. Those statistics make the sluggish to 2014 for ETFs noticeable. In the first three months of this year, U.S. ETFs brought in just $15 billion. [A Record Year for ETF Inflows]

“The central cause for this sluggish rate is the persistently negative money flows out of SPY.  For the first quarter, this amounted to $18.9 billion, although in the month of March it was only a $1.5 billion negative number,” said Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York, in a note out Wednesday.

The “SPY” to which Colas refers is the SPDR S&P 500 ETF (NYSEArca: SPY), the world’s largest ETF. If there is a silver lining in the $18.9 billion pulled from SPY in the first quarter, it is that $17.4 billion was pulled from the ETF in January and February combined, according to ConvergEx data. There is even better news.

“That distinctly risk-averse tone of trading for January and February reversed itself completely in March.  Over the last 30 days investors have added $15.5 billion to equity fund and actually reduced their exposure to bond funds by $6.5 billion,” said Colas.

Departures from fixed income ETFs come after investors poured $16 billion into those funds from the start of February through Feb. 21. When it comes to bond ETF outflows, Treasury funds have been hit hard, perhaps a sign that some investors are forecasting higher interest rates sooner than later. Investors pulled $10.3 billion from Treasury ETFs last month. [Treasury ETF Outflows Could Portend Higher Rates]

Some of that cash may have flowed into cyclical sector ETFs.

“ETFs dedicated to Financial stocks had $1.5 billion of inflows last month, and those products which focus on Consumer Non-Cyclicals had $752 million of outflows.  Technology ($939 million of inflows) and Basic Materials ($895 million) were the other two sector winners last month.  If you were to look up ‘Cyclical rotation’ in the dictionary, you’d see March’s ETF money flows in the definition,” said Colas.

Despite the Federal Reserve’s rejection of Citigroup’s (NYSE: C) plans to return more capital to shareholders via increased buybacks and dividends, the Financial Select Sector SPDR (NYSEArca: XLF) jumped 4.1% last month. That could be a sign of things to come as XLF, the largest U.S. sector ETF, is one of the two best  of the nine sector SPDRs in the month of April. [Sector ETF Ideas for April]

Financial Select Sector SPDR


Tom Lydon’s clients own shares of SPY.

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