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.
Among fixed-income options, only the iShares TIPS Bond ETF (NYSEArca: TIP) made it to top 10 most popular ETF plays of the past month, seeing $2.0 billion in net inflows. Treasury inflation-protected securities have grown in popularity in recent months on rising inflationary pressure, especially in recent sessions after the surge in crude oil prices in response to the Organization of Petroleum Exporting Countries’ deal on production cuts, which further fueled inflation expectations.
On the other hand, emerging market assets and safe-haven plays were among the least popular investments of November.
The iShares MSCI Emerging Markets ETF (NYSEArca: EEM) was the most unloved play of the past month, experiencing $3.6 billion in net redemptions. Meanwhile, the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) lost $1.0 billion. Emerging market assets were hit with a double whammy as a strengthening U.S. dollar and protectionist rhetoric out of President-elect Trump weighted on the asset category.
Gold assets also suffered from a blow, with SPDR Gold Shares (NYSEArca: GLD) seeing $2.3 billion in outflows and iShares Gold Trust (NYSEArca: IAU) shrinking by $1.1 billion. The safe-haven gold bullion has been pushed aside in the risk-on environment, lost its luster in light of a stronger USD and became less attractive in a rising rate environment.
Similarly, the iShares Edge MSCI Min Vol USA ETF (NYSEArca: USMV) saw $734 million in outflows and iShares Edge MSCI Min Vol EAFE ETF (NYSEArca: EFAV) lost $689 million as investors turned to riskier assets. Moreover, the low-volatility factor emphasizes areas like healthcare, information technology and consumer staples, or sectors that have underperformed in the recent Trump-induced rally.
Lastly, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) saw $520 million in redemptions and SPDR Barclays Short Term Corporate Bond ETF (NYSEArca: SCPB) experienced $478 million in outflows as bond yields rose. Yields on benchmark 10-year Treasury notes moved as high as 2.488% Thursday, or near its highest since September 2014.