As the markets digested a Donald Trump presidential election win, investors turned to exchange traded funds to quickly capitalize on potential areas of growth.
Convergex Chief Executive Eric Noll said that clients were trading almost three times more ETFs on Wednesday, the day after the election, than they did on Tuesday while total share trading jumped 50%, the Wall Street Journal reports.
“In times of market stress, traders and institutions have to adjust their portfolios quickly. The easiest way for people to refocus their portfolios without picking individual stocks is ETFs,” Noll told the WSJ. “We’ve seen this trend developing over the past couple of years and it is really picking up steam now.”
After Trump’s upset win, almost 3.2 billion shares of ETFs were traded Wednesday, or more than double the usual volume, as traders tried to prognosticate which areas of the market would benefit the most from a Trump administration’s regulations, trade policy and spending through ETFs.
For instance, Trump’s pledge to repeal financial regulations imposed under Dodd-Frank helped the Financial Select Sector SPDR (NYSEArca: XLF) see $5 billion change hands on Wednesday, the most daily activity in five years.
[related_stories]With Clinton’s loss, investors pared down bets of reprisals on the biotechnology and pharmaceutical industry for their high drug prices, with $756 million flowing into the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) on Thursday, the largest daily inflow into fund.
Meanwhile, Trumps vow to limit immigration and trade with Mexico and build a wall along its border triggered a record 17.6 million share daily volume in the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) after the ETF plunged 8.5%.
The markets also took lessons learned from the so-called mini flash crash of August 2015 and applied countermeasures to ensure a more orderly market open. In the early morning after the election, the NYSE’s Arca electronic exchange notified traders it would allow stocks to trade in a wider price band in early minutes, which helped prevent trading halts that occur when prices move too quickly – the NYSE Arca also did the same after the U.K.’s surprise Brexit vote.
Consequently, only 14 trading halts, six of which were exchange traded products, occurred after the election, compared to the 70 trading halts the day after Brexit and the nearly 1,300 on August 24, 2015.
For more information on ETF flows, visit our ETF performance reports category.