Concerns about trade war play out in ETF flows

Concerns about trade war play out in ETF flows
Investors are hell-bent on industrials-to-small-caps rotation trade
JUN 20, 2018
By  Bloomberg

Angst over tariff tit-for-tats played out in exchange-traded funds as companies in the cross hairs lost cash and those regarded as havens attracted inflows. The Industrial Select Sector SPDR exchange-traded fund (XLI) shed more than $406 million Tuesday, the most since April, after the Chinese government warned it would "retaliate forcefully" should the U.S. impose more duties against the country's products. XLI's heavily-weighted stocks include firms with large global holdings vulnerable to trade frictions, including General Electric Co., Boeing Co. and Caterpillar Inc. The dollar's recent advance, which erodes the value of profits generated overseas, has also dragged on the $11.8 billion fund, which is down 2.45% so far this year. Meanwhile, the biggest ETF tracking small- and mid-cap stocks, the iShares Russell 2000 fund, clocked its largest cash infusion since March, taking in $641 million. Smaller, more domestically oriented companies are generally seen as a safe bet since they make most of their money at home. Companies in the ETF have a median market cap of $2.41 billion, compared with $105.2 billion for the SPDR S&P 500 ETF Trust. The small-cap safety trade may be on the verge of fraying, however, as the trade dispute between the world's two largest economies deepens, potentially hitting U.S. growth in the process. Donald Trump's threat to impose tariffs on another $200 billion of Chinese imports sent global risk assets plummeting Tuesday, though markets later found more solid footing. "I think at some point it does come back to hurt those businesses," Emad Mostaque, co-chief investment officer at Capricorn Fund Managers, said in an interview Tuesday. "What you saw at the start of the year was global synchronized growth. It was a cooperative game. Now, we're moving to a more competitive, negative-sum game. So eventually these tensions will come down into this part of the market."http://www.investmentnews.com/wp-content/uploads/assets/graphics src="/wp-content/uploads2018/06/CI116043620.PNG"

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.