2019 was a very good year for almost everything. After a weak 2018 performance set a favorable starting point for both stocks and bonds, easing monetary policy actions helped produce the best annual returns in a decade for the standard 60/40 portfolio.1 Over 75% of global stocks had positive returns,2 and 97% of the bonds in the Bloomberg Barclays U.S. Aggregate Bond Index registered a gain in 2019.
Finding positive returns in 2019 was like making an easy layup, giving investors plenty of opportunities to run up the score.
Asset class ETF flows: Active funds poised to come off the bench
After averaging $12.9 billion a month and taking in a record $26 billion in June alone, fixed income flows were the star player in 2019. Flows alone accounted for a 24% expansion in the asset base for bond ETFs. The strength in flows stemmed partly from market-related reasons (income in a low-rate world) and partly from secular forces.
By contrast, even the eye-popping $81 billion of inflows to equity ETFs in November and December wasn’t enough to pull full-year flows back to prior-year levels for that asset class. In fact, 2019 produced the lowest annual equity fund flows of the past five years. Investors appear to be responding by scouring the globe for improved prospects. Inflows have increased outside the US, especially among emerging market ETFs.