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

Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034
Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034

New report shows dimmed outlook for benefits to retirees and disabled Americans, creating further pressure for federal tax hikes or more borrowing.

NY Republican Stefanik presses SEC to probe Harvard bond sale
NY Republican Stefanik presses SEC to probe Harvard bond sale

Open letter to SEC Chair Paul Atkins questions whether the Ivy League university withheld material information prior to its $750 million taxable bond offering.

Ex-LPL leader re-emerges at The Wealth Consulting Group
Ex-LPL leader re-emerges at The Wealth Consulting Group

The Las Vegas-based hybrid RIA overseeing $8.8 billion in assets has named Andy Kalbaugh president to help scale its advisor platform.

Envestnet extends investment offerings with new alts model portfolios
Envestnet extends investment offerings with new alts model portfolios

The wealth tech giant – in collaboration with Fidelity, BlackRock, State Street, and Franklin Templeton – is offering its advisor and wealth firm users more ways to diversify.

Just as wealth industry M&A was picking up, economic uncertainty could kill it again
Just as wealth industry M&A was picking up, economic uncertainty could kill it again

Deal volume increased post-election but now caution has taken over.

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.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave