Last week, redemptions in the ETF space involved $5.0 billion from S&P 500 proxies as well as $3.7 billion from the small-cap arena via iShares Russell 2000 (IWM) alone. Market participants also appear to be selling into strength; that is, investors bid adieu to another $200 million of S&P 500 ETFs during the Yellen-inspired stock rally of Wednesday, May 21. Block traders liquidated roughly $80 million of IWM.

The size of the outflows themselves are not particularly alarming. The aggregate net redemptions from funds like S&P 500 SPDR Trust (SPY), Vanguard S&P 500 (VOO) and iShares Russell 2000 (IWM) barely amount to a few percentage points of each fund’s total assets under management. In other words, a stampede for the exit door has yet to occur.

Nevertheless, as money slowly drips out of U.S. stock assets, net creations for foreign equities is on the rise. For example, iShares MSCI Emerging Markets (EEM) has picked up nearly $5.0 billion in the second quarter so far. That increase in demand is showing up in the price outperformance of emergers over domestic stocks. The EEM:SPY price ratio is hinting at a shift that briefly showed promise at the tail end of 2012, yet ultimately faded. Will EEM:SPY finally break through and hold above a long-term trendline, offering super-sized price appreciation for the advocates of developing regions?

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