From stocks to bonds to factor funds, safety was the name of the game for ETF investors in November.
In a month dominated by midterm elections, trade tussles, Federal Reserve talk and concerns about slower growth, the message was clear: Steer clear of risk. Oil tumbled, credit spreads widened and tech stocks languished, all as defensive areas like health care, consumer staples and utilities boomed.
"Anything with risk is being sold," said Mark Hackett, chief of investment research at Nationwide Funds Group, which manages $60 billion. "Anything with safety is being bought."
Equity exchange-traded funds took in more than $30 billion in November, the most since January, Bloomberg data through Nov. 29 show. But the makeup of the recent buying was very different from the beginning of the year. In January, the S&P 500 Index surged 5.6%, a more rosy setup than the volatile trading of late that's sent investors running for shelter.
In aggregate, ETFs holding utilities took in $974 million in November, the most in any month since early 2016. Investors poured $1.3 billion into funds owning consumer staples companies, making it the second best month of the year for the sector. Health care ETFs saw $1.4 billion worth of inflows, the most of any sector and its seventh straight month of net cash gains.
It's a rare combination on the leaderboard, according to Bloomberg Intelligence. In fact, of all the sectors, consumer staples and utilities have placed last in performance most often since 2012. That uncommon pair may not persist, however, should positive trade news come out of this weekend's G-20 summit.
"Most of the money traded in the world these days is not traded off of fundamentals, it's traded off of a reactionary type of trading," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co. "There could be a reaction away from those safety flows if and when we do get a deal and the economic data does not weaken."
A defensive posture has also dominated factor-based ETFs, which slice and dice the market based on different characteristics. Those holding cheap stocks, also known as the value factor, saw more than $4.5 billion worth of inflows, the most in nearly two years. And ETFs focused on companies with lower volatility and a steady ride took in $3.2 billion, also the most since 2016 and more than double any other month this year.
There's a similar feel in fixed income, where funds that hold government debt are on track for more than $8.6 billion of inflows in November, the most since October 2014 and more than any other credit category, according to Bloomberg data. The biggest gainers are ETFs that own short-term Treasuries.
The $17 billion iShares 1-3 Year Treasury Bond ETF (SHY) has taken in more than $2 billion this month, the most in over four years. Investors also piled into the $7 billion SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL), which had more than $1.7 billion of inflows through Nov. 29.
Yields on two- and five-year Treasuries are "virtually identical now," and investors are rushing into short-term government debt to capture the unusual lack of a spread, said Mohit Bajaj, director of exchange-traded funds at WallachBeth Capital.
"Treasuries are currently giving investors a higher yield for minimal risk," Mr. Bajaj said. "As we get toward year-end, people are locking in gains and parking in these products until they feel the volatility in markets slow down."
Of course, the other side of the trade is the dumping of funds filled with corporate bonds and bank loans. Investors have yanked more than $1.1 billion from ETFs tracking corporate debt this month, with the $30 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) topping the list.
"LQD is correlated to the equity markets," Mr. Bajaj said. "So as credit spreads widen, it will underperform."