Last Friday, the Labor Department said U.S. employers added 288,000 jobs in April, the largest monthly gain in over two years, while the unemployment rate fell to 6.3%. Inflows to exchange traded funds indicate the jobs number is the just the latest data point investors view as a sign the U.S. economy is strengthening.
Although ETF inflows have been sluggish to start the year, that lethargy abated in April with inflows totaling $15.1 billion as of April 29, more than half the 2014 total. [ETF Inflows Solid in April]
There is evidence to support the notion investors are preferring equity ETFs over bond funds. “Flows into U.S. equity ETFs are outpacing fixed income. U.S. bond ETFs have absorbed $4.5 billion since April, less than the $5.3 billion sent to equity funds, Bloomberg reported.
Still, nine of the 10 worst ETFs in terms of 2014 outflows are equity-based funds, including the SPDR S&P 500 ETF (NYSEArca: SPY), PowerShares QQQ (NasdaqGM: QQQ) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO).
At the sector level, energy and health care ETFs have bee impressive asset gatherers as have ETFs holding real estate investment trusts, which have benefited from declining Treasury yields. “Energy, health-care and real estate ETFs have absorbed the most money among industry funds this year, taking in more than $3.5 billion each,” according to Bloomberg.
Amid the rotation to value stocks away from momentum fare, the Energy Select Sector (NYSEArca: XLE) has been the best asset gatherer among sector ETFs, hauling in $2.2 billion while the iShares U.S. Energy ETF (NYSEArca: IYE) has brought in $666.1 million. [Energy ETFs Lead Sector Inflows]
A 13.2% decline in 10-year Treasury yields has sparked combined inflows of the about $2.8 billion to the Vanguard REIT ETF (NYSEArca: VNQ), iShares U.S. Real Estate ETF (NYSEArca: IYR) and the Schwab US REIT ETF (NYSEArca: SCHH). [Economic Data Lifts REIT ETFs]
Among bond ETFs, only the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) ranks among the top-10 ETFs overall for 2014 inflows. Since the start of April, however, investors have shown a taste for international bonds. As just two examples, the SPDR Barclays International Treasury Bond ETF (NYSEArca: BWX) and the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY) have seen inflows of $185.8 million and $101 million, respectively, since April 1.
iShares U.S. Real Estate ETF
Tom Lydon’s clients own shares of QQQ and SPY.