“After outflows in the last seven months of 2013, fixed income mutual funds gathered $60 billion in fresh money during this year with non-short maturity products adding $49 billion. The overall number is now ahead of the $40 billion of inflows for ETFs. While short-term ETFs remained popular, with $9.3 billion in new assets in the first half of 2014, this was outpaced by the $31 billion for other maturity buckets as interest rates have come down making longer-term products more appealing,” said S&P Capital IQ.
Among sector ETFs, the Energy Select Sector SPDR (NYSEArca: XLE) is easily this year’s leader with inflows north of $3 billion. Even with the energy rally, the sector remains attractively valued. The sector trades at 15.6 times earnings compared to 17 times for the S&P 500, but energy stocks are expected to post earnings growth of 14.6% compared to 11.1% for the benchmark U.S. index, according to Bloomberg.
The second quarter more robust inflows to sector funds as the Industrial Select Sector SPDR (NYSEArca: XLI) and the Utilities Select Sector SPDR (NYSEArca: XLU) saw quarterly flows of $1.5 billion and $1.4 billion, respectively.
Vanguard FTSE Developed Markets ETF
Tom Lydon’s clients own shares of EEM and HEDJ.