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ETF Asset Report for January: Stocks, Energy & Gold Win

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·4 min read
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Wall Street has been on choppy ride since the start of 2022 due to rising rate worries. The 10-year U.S. Treasury yield soared to its highest point in two years on Jan 18, 2022, hovering around 1.87%. Rates have been rising in the United States on the Fed’s rate hike bets. Higher inflationary expectations emanating from supply chin disruptions as well as higher crude prices should make Fed members comfortable with rate hikes in the coming days.

The Nasdaq, heavy on technology and growth stocks, crawled into the correction zone. The Nasdaq Composite lost 13% in January as investors continued to walk out of the high-growth tech shares on surging interest rates. The S&P 500 logged its worst month since March 2020. The index was down about 5.3%. The Dow Jones has backtracked about 4% while the Russell 2000 was off 10.7% last month.

Against this backdrop, below we highlight a few ETF areas that garnered huge assets in January and that have seen assets flowing out.

U.S. Equities

U.S. equity ETFs like Vanguard S&P 500 ETF VOO andVanguard Total Stock Market ETF VTI garnered about $4.10 billion and $3.93 billion, respectively, and captured the top two spots. Though the markets logged the worst month since March 2020, decent corporate earnings and upbeat GDP growth data led investors toward this investing zone.

Developed Markets

Developed market equities ETFs iShares MSCI Kokusai ETF TOK and Vanguard FTSE Developed Markets ETF VEA attracted $3.67 billion and $2.11 billion, respectively, in assets. As against the U.S. economy, most developed economies are still pursuing easy money policies, which is good for equity investing. This has probably veered investors toward developed market equities.

Leveraged Nasdaq

ProShares UltraPro QQQ TQQQ hauled in about $3.48 billion in assets. Though the Nasdaq bled last month, the tech-heavy index holds promise over the long term. Probably this is why, investors poured money into the index and cashed in on the dip.

Financials, Energy & Consumer Staples: 3 Winning Sectors

Financial Select Sector SPDR Fund XLF,Energy Select Sector SPDR Fund XLE and Consumer Staples Select Sector SPDR Fund XLP fetched in about $2.72 billion, $2.40 billion and $1.99 billion in assets, respectively.

Rising rate worries are great for financial stocks. As banks seek to borrow money at short-term rates and lend at long-term rates, a steepening yield curve earns more on lending and pays less on deposits, thereby leading to a wider spread. This expands net margins and increases banks’ profits (read: ETFs to Buy on Likely March Rate Hike With More in the Cards).

Energy stocks have been in a sweet spot currently. Oil prices have soared to their highest levels in many years as geopolitical tensions in the Middle East and Europe threaten to disrupt supply while demand continues to rise.

Demand for food and beverage should remain in the sweet spot in the coming days as these are necessary items and less ruffled by economic weakness, if there would be any. These products constitute consumer staples sector, which is non-cyclical in nature and hence a safe bet irrespective of the economic conditions.

Gold Glitters  

SPDR Gold Trust GLD garnered about $2.30 billion in assets.  Gold is considered an inflation-hedging asset. Gold closed out 2021 with a loss of 3.6%, marking its biggest annual decline since 2015. This made the metal a bargain.


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iShares MSCI Kokusai ETF (TOK): ETF Research Reports
 
SPDR Gold Shares (GLD): ETF Research Reports
 
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
 
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
 
Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
 
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
 
Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
ProShares UltraPro QQQ (TQQQ): ETF Research Reports
 
Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports
 
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Zacks Investment Research