Investors leapt into the stock market last week, when Wall Street’s postelection rally continued in near-uninterrupted fashion, and in large part, they did it through exchange-traded products.
Flows into U.S.-listed ETPs, which include exchange-traded funds and the smaller category of exchange-traded notes, totalled $ 17.9 billion last week, according to data from Credit Suisse. That’s more than three times the average weekly inflow of $ 5 billion, and it brings the total postelection inflows to more than $ 60 billion.
The S&P 500 SPX, -0.81% jumped more than 3% last week, its fourth weekly advance in the past five weeks. Since the election, investors have bet that President-elect Donald Trump would advocate for policies — including corporate tax cuts and environmental and financial deregulation — that would accelerate economic growth. Major indexes have subsequently rallied to repeated records, though they closed lower Wednesday after the Fed said it would raise interest rates at a faster clip than had previously been anticipated.
Still, the overall move in equities reflects a broader and ongoing trend toward ETFs and away from mutual funds, which come with less transparency, higher costs and taxes, and can’t be traded intraday. While there were inflows of $ 11.8 billion going into ETPs that track U.S. equities, several times the $ 2.7 billion average, the equivalent category of mutual funds saw outflows of $ 8.8 billion over the week.
Large-cap stocks saw particular adoption, according to the investment bank, with flows of $ 6.9 billion going into ETFs that track the category — significantly above its average weekly inflow of $ 1.2 billion. Mid-cap ETFs saw $ 1.3 billion in inflows, compared with their $ 220 million weekly average, while small and microcap stocks had $ 1.2 billion in inflows last week. That group sees $ 390 million a week in inflows, on average.
Unsurprisingly, ETFs that track cyclical stocks saw the biggest inflows over the week, while defensive names, which are favored in times of slower growth, saw outflows. ETPs covering the financial sector — which have made up the bulk of the so-called “Trump rally” — saw inflows of $ 837.1 million last week, the most of any industry. Health-care ETPs saw the sharpest outflows, with $ 552.1 million leaving the category.
Data showing the flows in and out of exchange-traded products that track different economic sectors.
Among other fund categories, fixed income ETPs saw $ 3 billion in inflows, the largest weekly inflows into the category since September. Credit Suisse wrote that outside of the most widely used high-yield bond ETFs, products focused on shorter duration junk bonds, senior loan ETFs, and rate-hedged bonds “were all popular areas of interest as well.”
It named the SPDR Bloomberg Barclays Short Term High Yield Bond ETF SJNK, -0.50% the PowerShares Senior Loan Portfolio BKLN, +0.00% and the iShares Interest Rate Hedged High Yield Bond ETF HYGH, -0.46% as funds that saw particular inflows.