ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETF Investors Coming Back in Defensive Mode
News
Share

ETF Investors Coming Back in Defensive Mode

Stoyan BojinovMar 09, 2016
2016-03-09

The bullish momentum seen in February appears to have spilled over nicely thus far into March, but uncertainty lurks underneath the surface as made clear by investor positioning in defensive assets.

A closer look at ETF flows from the prior month reveals some key trends that are easily overlooked if we only consider the performance of the major averages.

Where Did the Money Go in February?

Investors took advantage of choppy conditions last month by increasing their exposure to defensive assets. Broadly speaking, equities saw outflows while bonds and commodities managed to attract money in February, bringing hope to some beaten down names and profit-taking pressures onto others.

The top gainers in terms of assets for the month of February were concentrated in low-risk corners of the market. Continued uncertainty over China’s growth prospects and prolonged weakness in Europe remain big question marks for investors to swallow amid a shifting Fed policy at home.

Recession talks, mixed earnings, and a generally muted growth outlook prompted inflows for risk-off names:

  • Gold (GLD A-).
  • Low-Volatility (USMV A+).
  • 20+ Year U.S. Treasuries (TLT B-).
  • Utilities AlphaDEX (FXU B).

Some of the biggest losers for the month included:

  • Biotechnology (FBT C+).
  • Japan Hedged Equity (DXJ B-).
  • Financial Select SPDR (XLF A).
  • MSCI Eurozone (EZU B+).

The key takeaway from February’s flows data is that investors are playing defense in light of fragile macro conditions.


Content continues below advertisement

What’s the Bigger Trend?

Looking at one month of flows data and attempting to draw meaningful conclusions from it is like trying to describe a movie to someone using only a single frame of reference. It’s not going to work well, let alone consistently.

Because fund flows data tend to be more erratic in terms of month-to-month volatility, for simplicity’s sake, it may be helpful to consider the bigger trend at hand by looking at returns over a longer time frame.

Consider the heatmap below, courtesy of FinViz, which spans the ETF universe over the trailing one-year period (returns as of 3/8/16):

1year ETF heatmap

The key takeaways here are as follows:

  • Utilities (XLU A) have been outperforming for a while, so February’s spike in flows isn’t anything new trendwise.
  • Consumer staples (XLP A) is another market leader with a defensive profile on the sector level.
  • Gold (GLD A-) and related miners (GLD A-) and (GDXJ B+) have been running higher all year on growing safe haven demand and dirt cheap valuations, respectively.
  • Long-term Treasuries (TLT B-) are another name that was also green in February in terms of flows.

Ultimately, many of the highlights from February’s flows data have seen trends that are already in play, so to speak. The long-term picture, highlighted via the heatmap, and short-term direction, highlighted by the February flows data, both point to a bullish trend for the ETFs highlighted above.

Ways to Play

Investors have a plethora of options when it comes to choosing a best fit ETF for their objective. For starters, there are more than a few alternatives available when it comes to accessing each and every one of the assets mentioned:

  • Consumer Staples ETFs.
  • Utilities ETFs.
  • Gold and gold miners ETFs.
  • Low-Volatility ETFs.

When looking at the latest quarterly earnings results, investors may want to focus on the two strongest corners of the market:

  • Telecom Services.
  • Health Care.

Given that February flows point to some trends that have already been in play, it may be prudent to approach these “continuation plays” with caution. For starters, consider scaling into the aforementioned securities, whether it’s in defensive sectors or gold-related ETFs, rather than going all in.

The Bottom Line

While the uptrends at hand are likely to persist, this fragile environment is not conducive to making outsized bets in either direction. Remember that flows data is sometimes interpreted as a contrarian sign, meaning that the recent flight to safety in the market could be a sign that some safe-haven assets may actually be topping out soon when we consider they have already outperformed for the past year.

No matter the case, keep in mind that price is the best indicator.

Follow me @SBojinov

» Popular Pages

  • Tickers
  • Articles

Oct 02

ROSC Accesses Small-Cap Value Stocks

Oct 02

Shutdown Avoided! Now Buy Some Treasuries

Oct 02

Top Performing ETFs: Income and Asia ETFs on Top

Oct 02

World Markets Watchlist: October 2

Oct 02

DBMF a Strong Buy at Start of 4th Quarter

Oct 02

The U.S. Government Didn’t Shut Down, Treasury Yields Are Now Up

Oct 02

DGRW Nets Nearly $250 Million in One-Week Flows

Oct 02

Treasury Yields: The Long-Term Perspective

Oct 02

Ether Futures ETFs Debut as Crypto Fever Heats Up Again

Oct 02

With EFUT, VanEck Eyes Ether Futures

QQQ

Invesco QQQ Trust Series I

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

TSLY

YieldMax TSLA Option Income...

SCHD

Schwab US Dividend Equity ETF...

VGT

Vanguard Information...

XLK

Technology Select Sector SPDR...

TLT

iShares 20+ Year Treasury...

VNQ

Vanguard Real Estate ETF

SMH

VanEck Semiconductor ETF


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X