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In the third act of Shakespeare’s seminal play, King Henry V utters, “Once more unto the breach, dear friends, once more.” The words are intended to motivate the king’s troops amid continuous assaults on the gaps of the city walls during the siege of Harfleur. The motivation was necessary, as the weary English forces were beaten back and unsure about their prospects for victory. To forge ahead, courage and steely resolve were essential.
With the standard 60/40 portfolio sitting on current year-to-date gains against a backdrop of an elevated risk regime,1 investors may need to find a similar steely resolve today. As summer turns to fall, global capital markets face five key risks:
Asset class ETF flows: Bond funds still gaining, though record streak ends
For bond ETFs, the four-month streak of $20+ billion monthly inflows ended in August. As shown below, the asset class only took in $16 billion last month. Sizeable outflows from government funds dragged the segment lower, partially offsetting the strength in all other areas. Notably, the $16 billion figure is still above the five-year median for monthly flows of $10.5 billion.
Equity ETF flows remained somewhat constrained in August, even as the broader market rallied back to new all-time highs . The $17.3 billion inflow in August is below the five-year median figure of $20 billion. Flows into commodity funds continued to shine, led by precious metal exposures, including gold. In fact, while bond ETFs saw an end to their record streak, gold funds’ streak of more than $1 billion of monthly inflows continued in August. With an inflow of more than $2 billion last month, the record now stands at eight consecutive months.