After diving into bonds in a year of rising uncertainty, exchange traded fund investors finally shifted gears and turned to riskier stocks over November on increasing bets that President-elect Donald Trump could fuel economic growth.
Small-capitalization stock ETFs were a prominent play over November after market observers interpreted Trump’s renewed focus on the domestic economy as a boon for smaller U.S. companies. Over the past month, the iShares Russell 2000 ETF (NYSEArca: IWM), the largest ETF tracking small-cap stocks, attracted $6.3 billion in net inflows and its rival iShares Core S&P Small-Cap ETF (NYSEArca: IJR), which follows the S&P SmallCap 600 Index, saw $1.4 billion in net inflows, according to XTF data.
The markets also targeted specific sectors in response to the Trump win. For instance, the Financial Select Sector SPDR (NYSEArca: XLF) added $5.8 billion over the pat month as traders bet that Trump could roll back some of the harsher restrictions placed on financial institutions due to Dodd-Frank. Moreover, rising bets that the Federal Reserve will hike interest rates also bolstered the outlook on banks.
The Health Care Select Sector SPDR (NYSEArca: XLV) also experienced $2.0 billion in inflows. The healthcare sector, especially the biotech and pharma space, were under pressure for most of the year as investors anticipated a win for Hillary Clinton whom censured high drug prices, but the negative sentiment is dissipating as Trump has not put tackling drug prices as a high priority.
The Industrial Select Sector SPDR (NYSEArca: XLI) saw $1.7 billion in net inflows as investors anticipated Trump would have a positive impact on defense spending and would increase fiscal spending toward repairing and expanding America’s infrastructure.
Meanwhile, investors dove back into broad market stocks through popular S&P 500 ETF plays. The SPDR S&P 500 ETF (NYSEArca: SPY) saw $6.1 billion in net inflows, iShares Core S&P 500 ETF (NYSEArca: IVV) attracted $4.2 billion and Vanguard 500 Index (NYSEArca: VOO) brought in $1.2 billion.