Volatility has returned to the markets after historical levels of dormancy. What does this mean for the ETF ecosystem? After almost $77 billion in inflows in January, what should we expect to see with increased volatility?
Bloomberg noted last week that ETF flows were strong even though we experienced a sharp market sell-off. We decided to explore how ETF flows have historically responded to market declines.
HOW HAS VOLATILITY AND MARKET DRAWDOWNS AFFECTED ETF FLOWS HISTORICALLY?
We reviewed ETF monthly flows following a market pull back. Specifically, when S&P 500 returns were worse than -6%, we calculated the average of the following 3 months ETF flows.
As you can see, negative returns have actually been beneficial for ETF flows!