With August being a punishing month for U.S. stocks (the S&P 500 tumbled 5.8 percent), it is not surprising that exchange-traded funds suffered outflows. The August selloff sparked $112.3 billion of outflows from U.S.-listed exchange traded products, still a scant percentage of the over $2 trillion held exchange traded products trading in the United States at the end of the month.
Equity ETFs were particularly hard hit by investor departures last month, which was obviously the result of significant declines for the major U.S. indices.
With these ups and downs in the equity market, it should come as little surprise to see investors pulled close to $5.6 billion from equity ETFs as they waited for the ripples to subside, said State Street Global Advisors Vice President and Head of Research Dave Mazza in a note out earlier this week.
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That does not mean all equity ETFs were stung by outflows last month. In fact, some sector funds proved to be prolific asset gatherers in August. As risk appetite evaporated throughout the month, speculation grew that the Federal Reserve will not raise interest rates in September.
The combination of those factors sent Treasury yields tumbling, providing investors with a catalyst to embrace rate-sensitive real estate and utilities ETFs.
ETF investors seem to be placing their chips on lack of action from Chairwoman Yellen as REITs and utilities were bright spots pulling in a combined $1 billion, said Mazza.
REIT And Utilities ETFs
Focusing on the marquee names among real estate and utilities ETFs, the Vanguard REIT Index Fund (NYSE:VNQ), the largest real estate investment trust (REIT) ETF; and the Utilities SPDR (ETF) (NYSE:XLU), the largest utilities ETF; hauled in $379.3 million and almost $563 million, respectively, last month.
However, even stodgy utilities are providing skimpy refuge from the market's recent storm. Sure, XLU obeyed its seasonality as one of the best of the nine sector SPDRs last month, but all that means is that the utilities ETF was less bad than the other sector funds.
On Friday, XLU was one of 18 ETFs that have hit 52-week lows, a list that also includes the Vanguard Utilities ETF (NYSE:VPU) and two other utilities funds.
The late August surge in oil prices was enough to motivate investors to keep pouring into energy ETFs. Investors added $1.2 billion to the energy sector as the spot price of oil ended August with the best three day rally since 1990, noted Mazza.
With almost $793 million in August inflows, the Energy Select Sector SPDR (ETF) (NYSE:XLE) took in a hefty percentage of the $1.2 billion that went into energy ETFs during the month.
Inflows are nice, but investors' enthusiasm for the long oil trade has rapidly waned. West Texas Intermediate futures are off 1.2 percent at this writing, and XLE appears headed for a weekly loss of at least 1 percent.
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