S&P 500, Dow ETFs saw Substantial Inflows to Close out October



Talking Points:

  • Aggregate fund flows reveal a weekly net-inflow of $3.5 billion, versus the October complete of $3.4
  • High yield company debt ETF fell beneath stress once more this week whereas the SPDR homebuilder fund saw its largest single day inflows in 4 years
  • Midterm elections and commerce wars will dictate subsequent week’s fairness motion

After scrambling out of correction territory earlier within the week, the S&P 500 closed barely decrease Friday. At the shut, the index is now -7.15% under its peak on September 21st. Still, significant features have been posted this week and the index is as soon as once more constructive for 2018. Some traders might have sensed a backside as they poured an mixture $4.65 billion into VOO, SPY and IVV on Monday.

S&P 500 Hourly Price Chart October 2018

S&P500 price chart october end

In complete the three ETFs saw $3.5 billion in inflows for the week. That places the month-to-month complete at $3.4 billion throughout a interval when the S&P 500 shed over -6.5%. The constant demand for US fairness publicity suggests traders are nonetheless content material with the chance profile of the asset class. However, there are some areas the place that demand could also be waning.

Aggregate Fund Flows versus S&P 500 Performance

SPDR SPY ETF price chart

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One such space is the excessive yield company bond (HYG) ETF. Rising rates of interest have distorted the chance premium supplied by the underlying asset and thus the fund saw constant outflows this month. Outflows totaled -$861 million or roughly 6% of the fund’s market capitalization. Further, HYG saw its largest single day outflow since late 2016 earlier in October.

High Yield Corporate Bond ETF (HYG) Fund Flow and S&P 500 Price

S&P 500, Dow ETFs saw Substantial Inflows to Close out October

Federal Reserve officers might hike charges once more at subsequent Wednesday’s assembly, though extremely unlikely. Rising charges have additionally weighed on the housing market. This week, mortgage purposes dipped and a shopper confidence survey revealed fewer American’s plan to purchase a house within the coming months.

View our Economic Calendar for information releases due this week and subsequent.

Unsurprisingly, the rising charge surroundings has exerted downward stress on the SPDR homebuilder ETF XHB. Interestingly, XHB saw its largest single day influx for the yr and the most important since late 2016 this week.

SPDR Homebuilder ETF (XHB) Fund Flows and Price

S&P 500, Dow ETFs saw Substantial Inflows to Close out October

The inflows might counsel some traders see the affect of rising charges as overblown. Similarly, the fund closed at its lowest value in practically two years on Tuesday so the flows may very well be a easy “buy the dip” transfer by shorter-term traders. Either means, subsequent week’s FOMC determination and minutes will supply essential perception for the outlook of XHB and the housing sector.

Along with the Fed’s determination, the Reserve Bank of Australia and the Reserve Bank of New Zealand are due to announce their rate of interest selections subsequent week. On the real-time information aspect of the market, commerce wars and the midterm elections will doubtless dominate headlines and fairness value motion.

Read final week’s ETF report: S&P 500, Dow Rout Allows Bold Investors to Pick up Cheap Shares

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and comply with Peter on Twitter @PeterHanksFX

DailyFX forecasts on quite a lot of currencies such because the US Dollar or the Euro can be found from the DailyFX Trading Guides page. If you’re wanting to enhance your buying and selling strategy, verify out Traits of Successful Traders. And in the event you’re on the lookout for an introductory primer to the Forex market, verify out our New to FX Guide.


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