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%.
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.
“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.
For more market trends, visit ETF Trends.