Despite the spike in Treasury yields and the pullback in the equity markets, exchange traded fund investors continue to plow more money into the stock market.
According to State Street Global Advisors, U.S.-listed ETFs are off to their best start ever. Inflows have totaled $152 billion over the first two months of 2021. The inflows for the first two months of the year outstrips the prior best start by over 74%, or $88 billion, in 2017.
“In fact, only the flows from November and December 2020, when the dual headwinds of vaccine timeline and election uncertainty were initially removed, provided a better two-month period. Combining the last two months of 2020 and the first two months of 2021 leads to a total of $309 billion of flows in the past four months. If those four months were a full calendar year, it would rank fifth all-time – a strong testament to the bullish positioning from investors as of late,” Matthew J Bartolini, Head of SPDR Americas Research, State Street Global Advisors, said in the note.
Specifically, equity ETFs brought in $84 billion in new inflows, 13.5 times more last month than their typical 10-year February monthly average of $6.3 billion. Following $15 billion in February, sector ETFs have now taken in $21 billion to start the year, 40% more than their prior best start ever at $15 billion in 2017.
Broad-based commodity funds attracted their most flows ever last month at $1 billion, another signal of reflationary positioning by investors.
Loan ETF flows last month also ranked fourth all-time, pushing 2021 totals to nearly $3 billion.
Additionally, active funds brought in $14 billion last month and are now over $200 billion assets for the first time ever.
Bartolini noted that the record-setting monthly flows so far run counter to typical new year trends. On average, over the past ten years, January has been the eighth-best month in terms of new ETF flows, while February comes in toward the bottom as the tenth best month.
“The beneath-the-surface flows continue to paint a cyclically oriented bullish positioning picture, as well as one where investors are seeking out specific pockets of opportunity and not just buying broad beta to participate in the recovery rally,” Bartolini added.
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