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Are we on the Verge of Rotation into Cyclical Stocks?

Mar 25, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • A quick glance at recent ETF fund flow trends may signal a possibly substantial rotation among investors into the technology sector. Last week, technology stock ETFs observed significant inflows alongside bond ETFs and consumer stock ETFs.
     
  • Below we provide the top 20 ETFs by 7-day fund flows in the Quantamize coverage universe, as of Friday’s close.

Top 20 ETFs by 7-Day Fund Flow

Name Ticker 1-Day Fund Flow ($) 7-Day Fund Flow ($) Assets Under Management ($ billions) Net Expense Ratio (%)
SPDR S&P 500 ETF Trust SPY -$1,793,055,650 $4,248,322,240 $260.73 0.09%
Invesco QQQ Trust QQQ -$903,474,000 $1,413,708,300 $71.67 0.20%
iShares iBoxx $ Investment Grade Corporate Bond ETF LQD $35,233,950 $784,364,380 $33.35 0.15%
iShares iBoxx $ High Yield Corporate Bond ETF HYG $0 $685,575,940 $16.08 0.49%
iShares Russell 2000 ETF IWM -$1,218,663,045 $602,994,550 $41.96 0.20%
iShares Core MSCI EAFE ETF IEFA $0 $491,420,000 $59.69 0.08%
SPDR Gold Shares GLD $123,694,000 $419,116,000 $32.92 0.40%
iShares Broad USD High Yield Corporate Bond ETF USHY $354,880,785 $359,689,285 $0.84 0.22%
iShares Core Total USD Bond Market ETF IUSB $0 $319,736,080 $3.30 0.06%
Consumer Discretionary Select Sector SPDR Fund XLY $39,866,320 $284,279,960 $12.52 0.13%
Communication Services Select Sector SPDR Fund XLC $38,174,262 $276,466,026 $5.35 0.13%
Vanguard S&P 500 ETF VOO -$98,006,250 $269,817,748 $106.39 0.04%
iShares U.S. Treasury Bond ETF GOVT $139,936,720 $264,522,430 $8.54 0.15%
VanEck Vectors Semiconductor ETF SMH $137,402,500 $261,870,300 $1.05 0.35%
Health Care Select Sector SPDR Fund XLV -$87,661,127 $257,244,947 $19.16 0.13%
VelocityShares Daily 2x VIX Short Term ETN TVIX $12,497,145 $237,013,448 $0.97 1.65%
iShares Nasdaq Biotechnology ETF IBB -$27,981,975 $216,379,985 $8.08 0.47%
iShares National Muni Bond ETF MUB $110,519,300 $209,632,420 $12.14 0.07%
Vanguard FTSE Emerging Markets ETF VWO $103,644 $198,320,234 $63.15 0.14%
SPDR S&P Biotech ETF XBI -$9,197,459 $194,453,464 $4.37 0.35%

Source: ETF Global
 

  • Among the top 20 ETFs by 7-day fund flow in our coverage universe, 4 are technology stock ETFs. Over the last 7-days, these 4 ETFs have observed nearly USD$2.1 billion in fund flows.
     
  • Driving a large portion of these inflows was the Invesco QQQ Trust (QQQ), which received over USD$1 billion in fund flows just on Thursday! This may signal that investors are rotating into tech stock ETFs in an effort to avoid the potential effects of a global slowdown. As the relatively young technology sector continues to mature, analysts have argued that many technology companies could be fundamentally less exposed to cyclicality than other sectors like consumer and industrials due to the nature of their businesses.
     
  • It is no surprise to see bond ETFs represented so prominently in the table above after the US Fed announced they would hold interest rates steady last week, a dovish stance that took many by surprise.  
     
  • Consumer ETFs also saw positive inflows but lagged their tech and bond counterparts.  As highlighted in the table below, the popular Consumer Discretionary Select Sector SPDR Fund (XLY), is included in the top 20 ETFs by 7-day fund flow, receiving little less than USD$0.3 billion in net fund flows over the last 7 days. Worries about slowing growth do not appear to be impacting demand for consumer stocks with consumer discretionary one of the top performing sectors in the S&P 500 this year.
     
  • If you want to read more about concerns over slowed global growth, check out our blog from earlier in the day, “Global Growth Falling Off a Cliff? This Week we get to Peer into the Global Growth Crystal Ball and See,” where we cover the complex topic.

Categorized Top 20 ETFs by 7-Day Fund Flow

ETF Type Number of ETFs in Top 20
by 7-Day Fund Flow
1-Day Fund Flow ($) 7-Day Fund Flow ($)
Broad Market ETFs 3 -$3,109,724,945 $5,121,134,537
Bond ETFs 6 $640,570,755 $2,623,520,535
Technology ETFs 4 -$803,250,934 $2,086,412,049
Regional ETFs 2 $103,644 $689,740,234
Consumer ETFs 1 $39,866,320 $284,279,960

Source: ETF Global

 

 

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