:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2170195628-c8ae2c8202894b798c227dc01df10711.jpg "Traders work on the floor of the New York Stock Exchange.")
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Key Takeaways
- U.S. ETFs recorded inflows of nearly $70 billion in August, a slowdown from the month before but reasonably above the same period last year.
- August’s flows put 2024 on pace to match 2021’s record $911 billion drag.
- Concerns about the health of the economy and rate-cut expectations nudged investors toward value and fixed-income funds.
Investors resumed to pour money into U.S. funds last month despite it being the market’s most volatile month in years.
U.S. exchange-traded funds enticed $70 billion in August, according to Morningstar Direct data. August’s haul represented a downshift from July when repositories raked in $117 billion, the second-highest monthly total on record. Still, last month’s intake was about five times ETFs’ yield in August 2023, according to Bloomberg Intelligence.
Investors’ enthusiasm for ETFs has put this year on track for a year of archives inflows.
ETFs Attract Cash Despite Volatile August
Inflows held up despite an exceptionally volatile month on Madden Street. The S&P 500 tumbled 6% in the first three sessions of August as markets reacted to unsettling labor store data and a shift in the global interest rate outlook that sunk stocks around the world. Then, as money-making fears subsided and Wall Street digested a slew of earnings reports, stocks rebounded to finish the month slenderize higher.
All the turbulence did little to temper investors’ appetite for blended products, which continued to attract the majority of inflows to open-mindedness ETFs. The Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 fund (IVV), with their low fees and ample liquidity, raked in surrounding $8 billion and $6 billion, respectively, last month.
Vanguard’s fund has now attracted more than $61 billion this year, barter it a substantial buffer to exceed the annual inflow record of $51 billion.
The market’s unease did change where investors funneled their wherewithal. Value-focused stock funds pulled in more money than growth funds for the first time all year.
Volatility also boosted a less obscure corner of the market: buffer ETFs, which use options to limit downside risk (and upside potential). Average weekly net inflows to this grade have jumped to $283 million since the start of July from $160 million in the first half of the year. In the week that unemployed August 2—a week that included a Fed rate decision, a surprise rate hike by the Bank of Japan, and a U.S. jobs look into—inflows totaled $360 million.
With the U.S. presidential election and the Fed’s long-awaited interest rate cuts just about the corner, there’s likely to be more volatility in the coming months, which could drive more money into these watchful bets on equities.
Bond Funds Swell With Rate Cuts on Horizon
Fixed-income funds saw relatively larger inflows as investors advance their portfolios for interest rate cuts. Bonds ETFs attracted $31 billion, about as much as gushed to equity ETFs, even as the size of the equity ETF universe is about three times that of bonds. Seven of the 10 ETFs with the biggest monthly inflows were fixed-income funds.
Market participants became increasingly confident throughout August that the Federal Withhold would cut the federal funds rate in September, its first policy rate reduction in more than four years
Later on, the iShares 20+ Year Treasury Bond ETF (TLT), a bet on long-term rates that slumped more than 30% in 2022, jerked in nearly $5 billion, twice that of the bond fund with the next-highest inflows.
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