Risk-off exchange traded fund flows have caused Wall Street’s panic button to flash as headline flow numbers don’t necessarily tell the whole market sentiment story.
For the month of September U.S. listed exchange traded funds attracted $23.5B, which was led by equity funds garnering $15.5B and fixed income funds pulling in $11.4B.
Citi outlined in an investor note that weak underlying sentiment can be seen: “ETF investors were not high conviction buyers as flows continued to focus on low volatility exposures within each asset class. September flows followed the enduring year-to-date trend of cautious allocations.”
Moreover, Citi announced: “We recently lowered our 2022 year-end and 2023 mid-year S&P 500 targets to 4,000 and 3,900 respectively. The persistence of negativity in markets as evidenced by risk-off bias ETF lows… suggest we could rally into year-end on a near-term sentiment overshoot. However, risks of a severe recession or perceived Fed policy error are rising.”
Over the course of Q3 some prominent inflow/outflow ETF leaders were as follows:
Vanguard Total Bond Market ETF ( NASDAQ: BND ) and Schwab U.S. Dividend Equity ETF ( NYSEARCA: SCHD ) attracted $3.65B and $3.63B during the third quarter. While SPDR Gold Trust ( NYSEARCA: GLD ) and SPDR S&P 500 ETF Trust ( NYSEARCA: SPY ) watched $6.12B and $2.05B exit the door for Q3. See the top 10 ETF inflow and outflow Q3 leaders here.
In broader market news, stock index futures point to a lower open Wednesday after face-ripping gains to kick off the quarter.
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Risk-off ETF flows worries Wall Street