The COVID-19 pandemic has brought unprecedented challenges to markets across the globe, impacting liquidity across nearly all investment vehicles and asset classes. Despite these challenges, ETFs have performed well, providing market participants with liquidity and price discovery when they need it most.
The State Street Global Advisors SPDR Capital Markets team analyzed data from across the globe to better understand the performance of ETFs during the pandemic. Learn more about the report below.
Interview with the authors
Video content has been blocked in accordance with your cookie settings. You can access this feature by accepting all cookies or adjusting your cookie settings below.
Liquidity Buffers in Volatile Markets
Born out of the US stock market crash of 1987, ETFs have been tested by numerous market crises. During the COVID-19 crisis, surging ETF trading volume highlights that ETFs continue to function as originally intended — as buffers and sources of liquidity in stressed markets.
Globally, ETFs reached record trading volumes in March 2020.
ETF trading volumes in the US were highly correlated with March and April’s heightened volatility.
Even with record-high trading volumes, there was very little primary market activity; the secondary market acted as an additional layer of liquidity.
Liquidity and Price Discovery Tools
Even as bid-ask spreads widen and ETFs trade at wider-than-normal premiums and discounts, investors turn to ETFs to assess the valuation and liquidity of the overall market.
Take a closer look at:
Price dislocation in equity ETFs
Discounts on fixed income ETFs
Gold ETFs versus gold futures
The Road Ahead Looks Promising
Throughout the pandemic, ETFs have provided investors with liquidity when they need it most. Continuous enhancements from both exchanges and regulators are also instrumental in promoting resilient markets during the crisis.
What does this mean for the future? If trading volume is any indication, expect to see ETF adoption continue to rise.
Respond to Market Shifts
Navigate Ongoing Volatility
Stay up to date on COVID-19’s continuing impact on the markets with our latest research and insight.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., member FINRA, is the distributor for DIA, MDY and SPY, all unit investment trusts. ALPS Portfolio Solutions Distributor, Inc., member FINRA, is the distributor for Select Sector SPDRs. ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc. are not affiliated with State Street Global Advisors Funds Distributors, LLC.
THIS SITE IS INTENDED FOR QUALIFIED INVESTORS ONLY.
No Offer/Local Restrictions
Nothing contained in or on the Site should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction. SSGA Intermediary Business offers a number of products and services designed specifically for various categories of investors. Not all products will be available to all investors. The information provided on the Site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
All persons and entities accessing the Site do so on their own initiative and are responsible for compliance with applicable local laws and regulations. The Site is not directed to any person in any jurisdiction where the publication or availability of the Site is prohibited, by reason of that person's nationality, residence or otherwise. Persons under these restrictions must not access the Site.
Information for Non-U.S. Investors:
The products and services described on this web site are intended to be made available only to persons in the United States or as otherwise qualified and permissible under local law. The information on this web site is only for such persons. Nothing on this web site shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call 1-866-787-2257, download a prospectus or summary prospectusnow, or talk to your financial advisor. Read it carefully before investing.
Not FDIC Insured * No Bank Guarantee * May Lose Value