My friend and industry veteran Dave Nadig used to call the exercise of interpreting ETF asset flows as “reading the tea leaves.” I have always loved that image because it suggests asset flows can be telling, but they are also open to interpretation.
There’s no question we can make many informed assumptions from money in motion in ETFs. But, as he used to say, there can be more noise than signal in the numbers. Flows can represent short-term trading action from a handful of investors or long-term views on investment opportunities. It can be hard to tell the difference.
That said, it’s always an interesting exercise to look for clues about investor sentiment in the tea leaves, especially in the immediate aftermath of a U.S. presidential election. If we were to draw conclusions from where money was put to work in ETFs this election week, it would be that appetite for risk is on.
Asset flows week-to-date (through Thursday), according to FactSet data, show that some $32 billion in net new money was put to work in ETFs on election week. Almost $20 billion went into equity funds.
Within that asset class, big winners were some categories that had been losing some steam as concerns about concentration and valuations rang louder and louder. Among them, U.S. mega and large-cap stock funds, growth portfolios at the expense of their value counterparts, technology names, and leveraged bets.
Consider some ETF examples of renewed appetite for equity risk this week:
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Broad U.S. Large-Cap
The Vanguard S&P 500 ETF (VOO) picked up a net of $3.2 billion week-to-date, and more than $86 billion so far in 2024. The iShares Core S&P 500 ETF (IVV) welcomed $1.7 billion week-to-date. And the SPDR Portfolio S&P 500 ETF (SPLG) saw $613 million in net inflows through Thursday, putting year-to-date totals at $16 billion. The SPDR Dow Jones Industrial Average Trust (DIA), which has been a net loser YTD, picked up some $505 million in fresh net assets this week.
The actively managed Avantis U.S. Equity ETF (AVUS), the Dimensional U.S. Equity Market ETF (DFUS) were net asset gatherers this week. Broad U.S. large-cap exposure was a popular ETF trade on election week.
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Many flavors of “Qs”
The “Qs” had a great week too. The Invesco QQQ Trust (QQQ) saw some $600 million rush in this week. And it’s “mini-me” version, the Invesco Nasdaq 100 ETF (QQQM), attracted more than $320 million. Together, these two funds have seen $30 billion in combined net inflows in 2024. While these portfolios are baskets of nonfinancial stocks listed on the Nasdaq, they are often used as large-cap tech proxies. Tech ETFs, too, were largely in favor this week.
Other winners were leveraged takes like the ProShares UltraPro QQQ (TQQQ) It offers 3x the daily returns of the Nasdaq-100, which welcomed nearly $170 million in net new money week-to-date. The Direxion Daily Technology Bull 3x Shares (TECL) was another net asset gatherer. Inflows into these two ETFs this week stand out in contrast to year-to-date flows trends for these funds, which remain net negative for both, according to the data.
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Growth is back, baby!
In the eternal battle between value and growth, it was growth (again) that captured investor attention this week. For example, the SPDR S&P 500 Growth ETF (SPYG) took in some $850 million week-to-date. And the SPDR S&P 500 Value ETF (SPYV) bled about $530 million in the same period.
The Vanguard Growth ETF (VUG) picked up some $1.2 billion, putting year-to-date totals at $12 billion. But the iShares S&P 500 Value ETF (IVE) lost $184 million this week through Thursday. However, it remains net positive YTD, with $3.8 billion in inflows. The iShares MSCI USA Value Factor ETF (VLUE) also shed assets.
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Mega-Cap Trade Reenergized
Top 200, top 50, Magnificent Seven — the upper crust of market capitalization was popular with ETF investors this week. Funds like the iShares Russell Top 200 ETF (IWL) and the T. Rowe Price Blue Chip Growth (TCHP), with about 75 holdings, attracted new assets.
The Roundhill Magnificent Seven ETF (MAGS) picked up $74 million week-to-date, bringing in $752 million so far in 2024.
Partial-View Seat
We know that markets are in the business of pricing expectations. A presidential election now in the rearview mirror doesn’t change current macroeconomic conditions. But it can reshape investor expectations for what comes next. This week’s equity ETF asset creations suggest optimism in the outlook for U.S. equities, especially for the large-cap, growth-tilting kind.
But it’s worth remembering two things. First, reading one week of ETF flows as market signal is in many ways prescribing scientific value to reading tea leaves. Assign weight to your conclusions with care.
Secondly, and more importantly, many of the fresh-off-the-presses market forecasts that circulated this week post-election pointed out there is still a lot of uncertainty about what comes next. Yes, we may have a little more clarity this week than we did last, but we can hardly say that we have full visibility into what a new administration and a new year has in store. Diversification remains a prevailing call.
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