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October ETF Asset Report: U.S. Equities Prevail

The month of October was an eventful one. A host of corporate earnings and the passage of a $4-trillion budget measure by Senate and House drove the market. Especially, upbeat tech earnings and higher chances of tax reform were instrumental in pushing Wall Street higher and spreading optimism among investors.

Overall, global markets were steady in this time frame. Most importantly, Brent oil hit the $6-level on a likely OPEC output cut extension. At the end of the month, Brent touched its highest level since July 2015.

All the events left their mark on the quarterly ETF asset accumulation and redemption process. Let’s take a look at the corners that were the hot favorites of investors in the second quarter and those that were cast out. The data is as per etf.com till Oct 27, 2017.

U.S. Equities Stand Tall

The S&P 500 was on radar as investors flocked to SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV and Vanguard S&P 500 ETF VOO. The funds SPY, IVV, QQQ and DIA garnered respectively about $8.07 billion, $3.67 billion and $2.09 billion in assets in the month. PowerShares QQQ Trust QQQ also drew about $1.19 billion in assets. This was a confirmation of solid investor confidence in U.S. equities.

Small-Caps Also in Investors’ Favor

Small-cap U.S. ETF iShares Russell 2000 ETF IWM also gathered about $1.89 billion. Hopes of tax cuts and deregulation favored U.S. stocks. Also, at the end of the month, the Commerce Department released Q3 economic growth data of 3% compared with 3.1% growth in the second quarter. The latestreading beat the 2.5% growth forecast and was attained despite two deadly hurricanes in the quarter (read: 5 ETFs to Soar After Solid Q3 GDP Data).

Naturally, all these factors gave a boost to the otherwise-reeling small-cap ETFs as pint-sized stocks are more domestically focused. Signs of an uptick in the U.S. economy probably made investors look back at small-cap ETFs. The fund IWM attracted about $1.89 billion in the month (read: GOP Nears Tax Reform: Buy These ETFs).

International Economies No Less Important

While U.S. ETFs led the toppers’ list, international equities ETFs were not far behind. Vanguard FTSE Developed Markets ETF VEA and iShares Core MSCI Emerging Markets ETF IEMG saw outflows of $1.65 billion and $1.59 billion in assets, respectively in October.

Treasuries Fall Flat

As yields rose in the month on hawkish Fed statements, tax reform hopes and economic buoyancy, interest in bond investing receded. iShares 20+ Year Treasury Bond ETF TLT lost about $1.05 billion in the month. iShares 3-7 Year Treasury Bond ETF IEI shed about $591.6 million in assets. iShares 7-10 Year Treasury Bond ETF IEF saw about $351.2 million in assets gushing out (read: ETF Tricks to Stave Off Rising Rate Risks This Halloween).

Gold & Safe Sectors Collapse Too

As rates rose, dividend-paying equities lost their appeal. As a result, high dividend-paying sector ETFs like iShares U.S. Real Estate ETF IYR and Utilities Select Sector SPDR Fund XLU shed about $542.7 million and $483.0 million in assets. Consumer Staples Select Sector SPDR Fund XLP lost about $897.5 million in assets in the month as risk-on trade sentiments ruled the market. With rising rates, dollar prices recovered in the month. This weighed on the gold prices and investors dumped SPDR Gold Trust GLD. The fund witnessed leakage of $522.0 million in assets in the month.    

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