Plenty of investors may be out of office this summer, but ETFs aren’t on vacation. Despite ETFs frequently seeing Summer lulls, this year inflows are nearing a record pace. In fact, for some strategies, flows in July are contributing to a majority of their YTD flows. Taking a look around those ETFs can help get a sense of the trends entering the second half of the year.
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Intriguingly, the ETFs seeing the largest July flows relative to their YTD numbers largely invest in fixed income. Take the iShares Broad USD High Yield Corporate Bond ETF (USHY). USHY has seen $3.85 billion in YTD inflows, with $2.7 billion arriving in July alone.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), meanwhile, saw its July inflows of $2.3 billion lift its YTD flows out of the negative and into net inflows. A turnaround in flows for fixed income and corporate bonds in specific could owe to a changing perspective on rates and potential rate cuts.
Perhaps no strategy has benefitted from the rate cut outlook changing as much as the SPDR S&P 500 ETF Trust (SPY). Before July, SPY was facing billions in net outflows YTD, and while it’s still down in flows YTD, a strong July with $14.6 billion for the month has helped the OG ETF recover some ground. Rate cuts becoming much more likely this Fall may have helped drive investors into the ETF.
“It has not been a quiet summer for ETF investors,” said VettaFi Head of Research Todd Rosenbluth. “With strong flows in July, we are on pace to challenge the all-time record for a calendar year set in 2021. Historically, the fourth quarter has been a strong period for ETFs by advisors and institutions.”
