The same trend held for single-country exposures, the segment with the second highest relative flow percentage figure for January, at 1.5%. Almost $500 million left those strategies in the last five days of the month. Despite those outflows, single-country funds still took in more than $1 billion in January for the fourth month in a row. However, the devil may be in the details, as the inflows were dominated by China-focused ETFs, which took in $1.6 billion. It’s possible this dynamic represented savvy traders attempting to short the ETF prior to the Lunar New Year holiday. Short interest information becomes known 15 days in arrears, so we will have to wait to find out.
Sector ETF flows: Market volatility produced mixed results
From a sector perspective, January was a tale of two halves. At one point during the first half of the month, more than $8 billion had flowed into sector-related strategies—a January record. However, once growth fears stemming from the coronavirus took hold, the first of what would ultimately become $3 billion in outflows began.
More cyclical segments, such as Industrials, Materials and Financials, benefited early in the month on lower trade tensions, higher bond yields and expectations of strong growth. In the last week of the month, however, investors redeemed $2 billion across those three segments, offsetting some of early January’s gains.
The month ended mixed across sectors, with Technology and Consumer Discretionary segments taking in the most assets, despite their sizable overseas footprints. This positivity likely stems from the strong earnings reports produced in those sectors to date.4
The positive sentiment from earnings has not extended to Health Care. Despite 89% of Health Care firms surprising on revenue,5 investors are still shunning the politically charged sector.