ETF TRADING RESEARCH

August ETF Fund Flows

Steady In A Sea Of

Volatility

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Hi, My name is Corey and I‘m with ETF

Trading Research, today were reviewing

our recently published article…

August ETF Fund Flows Steady In A Sea

Of Volatility

August turned out to be one of the most

turbulent months we’ve seen in awhile

for the financial markets.

The stock market selloff that began in

China eventually spread around the

globe and triggered the first 10% selloff

in US stocks since 2011.

Despite the market turbulence August

ETF Fund Flows held steady. Total

assets invested in US listed ETFs ticked

up $2.7 billion during the month.

Don’t get me wrong, that’s a fraction of

the inflows we have seen in previous

months. And that’s a good indication

of…

The Emotion Driving June ETF Fund

Flows

Fear is the dominant emotion on Wall

Street. Fear and greed can be measured

with a variety of different indicators. The

VIX, put and call option volume, and

market breadth are some of my favorite

to track.

Guess what all of these indicators of fear

and greed all have in common right now?

They all indicate investors are running

scared… the VIX is perfect example.

The VIX is the CBOE Volatility Index. It

measures the implied volatility of S&P

500 index options. It measures how

much volatility investors expect of the

next 30-days.

As you can see, the VIX spiked more than

twice as it had been at any other time this

year and continues to be much higher

than it had been.

In other words, investors are expecting

the S&P 500 to move three times as much

as they did before the recent selloff

started. This is a clear visual

representation of fear in the markets.

ETFs With The Largest Inflows In June

Despite the fear in the markets ETFs like

Vanguard S&P 500 $VOO and SPDR S&P

500 $SPY still logged net inflows of

around $1.5 billion in August.

This tells me two things…

Long term investors and swing traders

had been waiting in the wings for a

pullback to buy large cap US stocks. So,

there are investors that are bullish on US

stocks despite the overall fearful tone of

the market.

It also tells me that there is a growing

group of investors that are using ETFs to

invest systematically. These investors

aren’t following every market gyration.

They have a plan to deploy their new

capital into a group of ETFs every month

no matter what the markets are doing.

That’s a good sign of the growth in the

ETF market and the strength of the US

stock market.

ETFs With The Largest Outflows In June

The outflows also had some clear cut

indications… the first being investors

don’t want anything to do with emerging

markets. Not surprising given that China

is the epicenter of the recent selloff and

it’s still considered an emerging market.

The two ETFs hit hardest by redemptions

were the Vanguard FTSE Emerging

Markets $VWO and iShares MSCI

Emerging Markets $EEM. Investors

pulled more than $1.3 billion out of VWO

and EEM in August.

We also saw large redemptions of two US

sector ETFs Health Care Select Sector

SPDR $XLV and Technology Select

Sector SPDR $XLK both had net outflows

of more than $1 billion in August.

So, investor also took profits of the high

flying health care sector and trimmed

their exposure to the technology sector.

Here’s the bottom line…

We’ve seen some profit taking and

money moving from the areas most at

risk to further losses given the backdrop

of current events. But through it all

money continues to flow into ETFs.

Don’t forget that high levels of fear in the

market typically don’t last long.

Especially when there is good economic

data like we have in the US right now.

If these fears prove to be unfounded it

could be the thing that sparks a massive

bull market rally in US stocks into the

end of the year.

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