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Stock ETF Investors May Be Getting Cold Feet After Record Run


As the equities market marches toward new highs, investors have been trimming their U.S. stock exchange traded fund exposure.

For instance, over the past week, the SPDR S&P 500 ETF (SPY) has lost $639.2 million in assets, according to ETF.com.

According to Bank of America Merrill Lynch, global investors have been cutting their U.S. stock exposure this month, with appetite for U.S. stocks tumbling to their lowest level since January 2008, as the decline in confidence for corporate profits caused fund managers to trim equity holdings to underweight, reports Jenny Cosgrave for CNBC.

In a recent Bank of America Merrill Lynch survey, 19% of investors polled last week were running underweight positions, compared to the heavy overweight stance held in the first quarter of the year.

The greater underweight positions suggest that investors are growing cautious over the continued strength in U.S. equities after the S&P 500 and Dow Jones Industrial Average closed at record highs.

“There is no loss of faith in economic recovery, and positioning still assumes that the U.S. dollar goes up, but doubts are creeping in – hence this jump in allocation to cash,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said in a note.

For larger ETF investors, there are number of ultra-short-duration bond ETFs that can be used as cash alternatives. For instance, the PIMCO Enhanced Short Maturity ETF (MINT) has a 0.33 year duration and a 0.73% 30-day SEC yield, and the Guggenheim Enhanced Short Duration Bond (GSY) has a 0.23 year duration and a 1.17% 30-day SEC yield. [ETFs for Cash Hoarders]

Nevertheless, the Bank of America Merrill Lynch survey also found that investors remain broadly bullish on equities, with around 47% of respondents overweight but still down 7 percentage points month-over-month.

Additionally, investors remain bullish on some sectors, increasing exposure to energy, technology and banks. Those who are interested in tracking these sectors can choose from the many sector ETF options, including the Energy Select Sector SPDR (XLE) , Technology Select Sector SPDR (XLK) and SPDR S&P Bank ETF (KBE) . [Customize Market Exposure with Sector ETFs]

For more information on the markets, visit our current affairs category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own shares of SPY.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.