A combination of encouraging health-related news and sizeable stimulus measures around the world sent risk assets bouncing back in April. Global equities finished up 11%—their best monthly return since 2011—and investment grade (IG) corporate credit ended the month just 3% below pre-pandemic crisis levels, regaining nearly all of its 21% March drawdown.
Every major asset class category had inflows in April, as investors broadly allocated capital so as not to miss out on any bounce-back gains. Even the losers—stock market segments that had been underperforming year to date through April 24—popped up in the last week of the month, pushing the rally even further.
The market exuberance is in sharp contrast to negative economic and corporate news, including forecasts of US second-quarter gross domestic product (GDP) declining a staggering 26% quarter over quarter1 and corporate profits coming in negative every quarter this year.2 This disconnect begs the question: “Is this rally real?”
Geographic ETF flows: US equity funds posted inflows, while non-US ETFs saw another month of outflows
Geographic equity flows reveal that sentiment was uneven in April. US ETFs had $19 billion of inflows, while non-US ETFs saw $10 billion of outflows, posting outflows for a second consecutive month. See the table below. Emerging market (EM) and developed market exposures led the non-US outflows, with EM equity ETFs marking their third consecutive month of outflows. Year to date the EM segment is down by almost $8 billion in flows, equating to a loss of nearly 4% off of its start-of-year assets. Currency hedged ETFs saw a larger relative decline, losing 13% from their start-of-year assets, while regional funds finished the month down almost 8%.