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ETF Asset Report: U.S. Equities Rule

Sanghamitra Saha
Wall Street finished in the green reversing its five-day negative trend on Thursday following news that United States and China have ramped up their efforts to resolve lingering trade disputes

The appeal of U.S. equities remained in August despite all odds, as hopes of a tax reform emerged, barring occasional geopolitical jitters. Overall, the broader remained lukewarm, with the S&P 500-based ETF SPY, Dow Jones-based ETF DIA and Nasdaq 100-based QQQ adding in the range of 0.1% to 1.8% in August (read: Top ETF Stories of August).

Same was the situation in the global market. A rising euro weighed on the Eurozone ETF to some extent. However, emerging market stocks and ETFs topped them all and stayed pretty steady in the month. Against this backdrop, let’s find out the top gainers and losers in terms of asset growth in August (source: etf.com).

U.S. Equities Held Their Head High

The S&P 500 was on radar as investors flocked to SPDR S&P 500 ETF Trust SPY and iShares Core S&P 500 ETF IVV, PowerShares QQQ Trust QQQ and SPDR Dow Jones Industrial Average ETF Trust DIA. The funds SPY, IVV, QQQ and DIA garnered respectively about $2.36 billion, $2.11 billion, $1.87 billion and $1.25 billion in assets in the month. 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 $1.85 billion. Hopes of deregulation and tax cuts favored U.S. stocks. Also, at the end of the month, the Commerce Department released Q2 economic growth data of 3% compared with its earlier estimate of 2.6%.

This was the best GDP growth since first-quarter 2015 and gave a boost to the otherwise-reeling small-cap ETFs as pint-sized stocks are more domestically focused. Signs of uptick in the U.S. economy probably made investors look back at small-cap ETFs. The fund IWM attracted about $1.85 billion in the month (read: 3 Reasons to Dump Small-Cap ETFs Now).

Gold Glitters Too

Along with equities, the safe-haven asset gold too was on investors’ radar. This is because confusion over the tension between North Korea and the U.S., and the passage of Trump’s several pro-growth policies kept the safe trades in the market steady. This led SPDR Gold Trust GLD to garner about $1.03 billion (read: 3 Reasons to Buy Gold ETFs Now).

Drive for Yields Remained Strong

Geopolitical risks,overvaluation concerns in equities, accommodative Fed minutes thanks to weak inflation and political uncertainty in the Trump administration kept Treasury yields lower in August (read: Multi-Asset ETFs for Uncertain Markets).

Yield on the 10-Year Benchmark U.S. Treasury declined to 2.12% on Aug 31, down 13 bps from the start of the month. This marked “the largest monthly drop in more than a year” in the 10-year Treasury yield.

Needless to say, investors would be interested in garnering higher yield amid marked levels of risks. Probably this is why, iShares Core U.S. Aggregate Bond ETF AGG drew about $1.31 billion of assets from investors. The fund yields about 2.41% annually.

Consumer ETFs See Huge Redemption

Consumer Staples Select Sector SPDR Fund XLP saw about $1.34 billion worth of outflows while Consumer Discretionary Select Sector SPDR Fund XLY witnessed about $928.5 million of assets gushing out.

Japan and Euro Zone Slip Too

iShares MSCI Japan ETF EWJ and iShares MSCI Eurozone ETF EZU lost about $551.3 million and $400.9 million of assets, respectively. Japan’s economy may have grown more stronger than expected in Q2, but investors are probably looking for more prominent signs of growth. And for the Euro zone ETF, the currency’s strength was a spoiler (read: Top and Flop ETFs of August: Metals Gain, Crops Crash).

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