Could Record Inflows Be On the Horizon For ETFs? | ETF Trends

With a potentially promising coronavirus vaccine driving investors to rotate out of tech stocks, driving stock ETFs to robust gains this week, exchange-traded funds appear poised for a robust finish to 2020.

On Wednesday, the S&P 500 climbed 0.81% while the recently downcast Nasdaq improved 1.64%, with Big Tech names like Apple adding 1.9%, and Facebook and Amazon advancing 1.8% and 2.5%, respectively. Tech giant Microsoft also gained 2.3%.

Meanwhile, the Dow had a robust start to the week, buoyed by Pfizer and BioNTech’s announcement of an over 90% effective coronavirus vaccine. Numbers were more muted on Wednesday, however.
Major stock ETFs are also breaking to higher ground on Wednesday after struggling the prior day. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all advancing.

Looking back over the past year, not only have 2020′s ETF inflows already beaten 2019′s total, but with the vaccine news from Pfizer on Monday the inflows are only more likely to be compounded, according to analysts.

“It’s going to be very helpful to ETF money flows … because you’re going to have both portfolio repositioning for a faster-than-anticipated resolution of Covid and you’re going to have the natural end-of-year flows out of mutual funds into ETFs,” DataTrek Research Co-Founder Nick Colas told CNBC’s “ETF Edge.”

“Those two factors combined can make for a record December of inflows into ETFs, particularly equity ETFs,” he said.

If such inflows occur, the ETF market could be targeting a record-setting year, potentially beating its best year, 2017, where it scored $476.1 billion in total inflows. Last year was the ETF market’s runner-up, with $326 billion in inflows.

Like stocks, ETFs are currently in the midst of a rotation related to optimism over an economic recovery, said Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors.

“Energy and banks are reacting very differently than, say, some of the value stocks you may find in consumer discretionary,” Bartolini said in the same “ETF Edge” interview.

Energy and banking ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF(XOP) and the SPDR S&P Bank ETF (KBE) are two areas that could be particularly poised to benefit from market rotations. The XOP and KBE rallied about 17.5% and 14.5% since Monday, respectively.

“I think that’s what we’re seeing from the market, trying to pick out the winners and losers as a result of the shift in sentiment,” Bartolini said.

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