US ETF flows slowed to lowest in a year as trade policy spooked investors

Investors in US ETFs reflected the caution seen in wider markets with the lowest level of inflows in a year.

State Street Global Advisors’ US-listed ETF Flash Flows report for April reveals $62 billion of inflows, which is below recent averages and puts the firm’s full year estimate of $1.3 trillion at risk. With $6 billion of outflows, small caps had their worst month ever.

Equity ETFs attracted 80% of all US-ETF assets at $38.7 billion, with $32 billion of this (67% of all ETF assets) focused on US equities, which is notable given that international stocks outperformed. Developed countries were most popular among international equities ETFs ($9.7 billion) with small positive inflows for global and emerging markets. US-listed single-country ETFs saw outflows of $3.5 billion.  

For bond ETFs, inflows to US-listed funds totaled $13 billion, as a record $15 billion outflows for private credit ETFs was offset by $19 billion inflows for ultra-short and short-term-government bond ETFs, marking these funds’ second-best inflow ever.

By sector, tech led with $2 billion inflows but this was almost all to one fund focused on levered bets on semiconductors, while energy and financials posted $3.4 billion outflows each.

While the volatile markets played a role in investor sentiment and behavior, Matthew Bartolini,CFA, CAIA, head of Americas ETF Research at State Street Global Advisors, says that weakness was already expected.

“Nutritionally there is no difference between spring and sparkling water. Without the carbonation, sparkling water also has the same chemical properties as water. The carbonation just makes sparkling water more combustible once shaken,” he said. “That’s today’s market. Even before the events of April, forecasts were being revised — lower for growth and higher for inflation. The redesign and paradigm shift of global macroeconomic modalities just pressurized markets.”

He added that the fizz in the market will not last forever, although the upending of what was once the normality of global trade is likely to mean uncertainty and volatility, especially with earnings, growth, and foreign investment in the US facing a downward trajectory.