ETF Investors Shunned Bonds, Dividends in October

On the other hand, ETF investors continued to dive into stocks. The PowerShares QQQ (NasdaqGM: QQQ), which follows the Nasdaq-100, attracted $2 billion in net inflows, iShares Core S&P 500 ETF (NYSEArca: IVV) saw $1.8 billion inflows and SPDR S&P 500 ETF (NYSEArca: SPY) added $1.6 billion.

Emerging markets remained a popular play, with Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) bringing in $1.2 billion and iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) adding $960.2 million. While still experiencing high trading activity, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) has not seen total assets under management fluctuate much for the month, which suggests that traders continued to utilize EEM for day-to-day exposure while long-term investors turned to the cheaper VWO and IEMG options – VWO has a 0.15% expense ratio, IEMG has a 0.14% expense ratio and EEM has a costlier 0.69% expense ratio.

Investors are also diversifying with international developed markets, with the and Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) bringing in $1.4 billion and iShares Core MSCI EAFE ETF (NYSEArca: IEFA) attracting $985.6 million. The two funds track developed European, Australasia and Far East, or EAFE, countries.

The Financial Select Sector SPDR (NYSEArca: XLF), which was the best performing sector of October, experienced $756.6 million in inflows on increased Federal Reserve rate bets. With a steepening yield curve, or wider spread between short- and long-term Treasuries, banks could experience improved net interest margins or improved profitability as the firms borrow short and lend long.

Full disclosure: Tom Lydon’s clients own shares of SPY, LQD, HYG and JNK.