ETF flows rumbling along
One of the most exhilarating parts of the WWE Royal Rumble isn’t the ring filling up—it’s the waiting. The clock ticks down, the crowd buzzes, and anticipation builds with every second until the next wrestler’s music hits.
Sometimes it’s a global superstar who electrifies the arena and immediately alters the tone of the match. Other times, it’s a forgettable entrant who barely makes an impact before being tossed aside. At the Royal Rumble, there’s always another entrant coming, another shock, another confrontation. No one gets to pause. No one gets to reset.
Just like our new macroeconomic paradigm. Investors sit between constant data and headlines the same way WWE fans stare at the countdown clock, knowing a market-moving catalyst is about to run out into the macro ring.
With $165 billion of inflows in January, ETF flows help illustrate how investors are reacting to the market’s relentlessness.
Non-US equities grab the January fund inflow belt
After years of heavy US equity concentration, non-US equity flows didn’t just walk down the rumble ramp—they stormed into the squared circle with authority.
In January, non-US equity ETFs pulled in $60 billion, the largest monthly haul on record. Even more striking, those flows represented 58% of all equity ETF inflows for the month—nearly triple their share of total equity ETF assets, which sits around 20%. This is a complete reversal of the past two years when non-US equity ETFs accounted for just 19% of total equity flows.
And like a tag-team partner sliding into the ring at just the right moment, emerging market (EM) equities added fuel to the momentum. Emerging market (EM) equity ETFs brought in $20.5 billion in January—a record.
When combined with the $15 billion of inflows over the final two months of 2025, EM’s rolling three-month flows surged to new highs. Blowing past the prior 2021 peak and breaking out of their median-bound range to sit 238% above the historical 80th percentile (Figure 1).
This EM flow strength has coincided with strong absolute (+9% gain) and relative (+6% over developed equities) returns in the past three months, supported by easing inflation pressures, a weaker US dollar, multiple fiscal impulses, improving earnings, and attractive starting valuations.1
There was depth and breadth with these non-US flows too. Every geographical region had inflows in January (Figure 2), including:
- 85% of EM equity ETFs
- 75% of international developed equity ETFs
- 70% of single-country and regional equity ETFs
Figure 2: Geographic flows
| In millions ($) | January | Year to date | Trailing 3-month | Trailing 12-month | Year to Date (% of AUM) |
|---|---|---|---|---|---|
| US | 37,988 | 37,988 | 250,749 | 665,602 | 0.45% |
| Global | 12,534 | 12,534 | 25,277 | 59,855 | 4.37% |
| International: Developed | 17,190 | 17,190 | 53,797 | 137,513 | 1.55% |
| International: Emerging markets | 20,541 | 20,541 | 35,444 | 58,815 | 5.54% |
| International: Region | 3,222 | 3,222 | 5,388 | 21,073 | 3.30% |
| International: Single country | 5,971 | 5,971 | 9,348 | 16,012 | 3.96% |
| Currency hedged | 875 | 875 | 1,258 | 5,429 | 2.28% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of January 31, 2026. The top two/bottom two categories per period are highlighted. The performance data quoted represents past performance. Past performance does not guarantee future results.
Sectors soar to records, led by cyclicals Sectors had a record $18.5 billion of inflows in January, narrowly outpacing their prior record of $17.8 billion from November 2016. This record was fueled by $19 billion of inflows into cyclical sector exposures. Or rather, 102% of the sector flows—well above their market share of sector assets (45%).
Materials (+$7 billion) and Energy (+5.6 billion) led sector inflows, given their relationship to the commodity complex and its support of sector earnings trends and price momentum. Financials (+$4.2 billion) and Industrials (+3.2 billion) also added noticeable support within cyclicals, a broader cohort that could have further upside in the supportive macroeconomic growth environment.
Defensive flows were mixed, with Health Care posting inflows but Utilities registering outflows. Tangentially, given Utilities’ relationship to the AI trade, outflows from Utilities mirror those from Technology and Communication Services.
Figure 3: Sector flows
| In millions ($) | January | Year to date | Trailing 3-month | Trailing 12-month | Year to date (% of AUM) |
|---|---|---|---|---|---|
| Technology | -1,469 | -1,469 | 344 | 7,006 | -0.36% |
| Financial | 4,196 | 4,196 | 1,222 | 385 | 3.97% |
| Health Care | 2,262 | 2,262 | 5,077 | 537 | 2.32% |
| Consumer Discretionary | -1,202 | -1,202 | -1,362 | -3,837 | -2.86% |
| Consumer Staples | 182 | 182 | -1,027 | -1,121 | 0.70% |
| Energy | 5,683 | 5,683 | 7,176 | 2,251 | 7.33% |
| Materials | 7,141 | 7,141 | 9,040 | 9,750 | 9.69% |
| Industrials | 3,289 | 3,289 | 5,595 | 10,586 | 4.50% |
| Real Estate | -142 | -142 | 2,846 | 4,598 | -0.17% |
| Utilities | -1,250 | -1,250 | -349 | 5,099 | -3.33% |
| Communications | -126 | -126 | 442 | 2,964 | -0.34% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of January 31, 2026. The top two/bottom two categories per period are highlighted. The performance data quoted represents past performance. Past performance does not guarantee future results.
The resurgence in sector flows also illustrates risk-on sentiment and investors’ renewed desire to make precise sector allocations for potential alpha generation amid the change in market leadership. And the resurgence has been driven by more than one strong month. Rolling three-month inflows are now well above the 80th percentile—after being near record lows in the middle of 2025.
Bond flows hit records as investors limit duration risks
Across all asset classes, bond ETF inflows were the most noteworthy, with the $56 billion setting a new record. These inflows were almost evenly split between the main secular drivers fueling the broader ETF industry: low-cost core building blocks (+$25 billion) and active strategies (+27 billion).
At the sector level, January marked another month of curve positioning bias toward the short end. Investors deposited $4 billion into short-term government bond ETFs and another $5 billion into the intermediate-term portion of the government bond market. At the same time, long-term government bond ETFs had outflows.
Figure 5: Fixed income flows
| In millions ($) | January | Year to date | Trailing 3-month | Trailing 12-month | Year to date (% of AUM) |
|---|---|---|---|---|---|
| Aggregate | 26,463 | 26,463 | 65,600 | 190,689 | 3.24% |
| Government | 6,269 | 6,269 | 28,361 | 100,977 | 1.19% |
| Short term | 4,464 | 4,464 | 19,033 | 68,403 | 1.53% |
| Intermediate | 5,121 | 5,121 | 13,714 | 34,323 | 3.36% |
| Long term (>10 yr) | -3,316 | -3,316 | -4,386 | -1,749 | -3.69% |
| Inflation protected | -554 | -554 | 449 | 11,082 | -0.80% |
| Mortgage backed | 632 | 632 | 160 | 12,567 | 0.63% |
| IG corporate | 6,124 | 6,124 | 13,082 | 40,279 | 2.00% |
| High yield corp. | -320 | -320 | 3,413 | 24,555 | -0.29% |
| Bank loans and CLOs | 4,115 | 4,115 | 5,229 | 10,441 | 6.89% |
| EM bond | 1,571 | 1,571 | 4,135 | 6,543 | 4.54% |
| Preferred | 26 | 26 | 370 | 1,720 | 0.07% |
| Convertible | 1,205 | 1,205 | 1,829 | 2,070 | 13.73% |
| Municipal | 10,295 | 10,295 | 19,978 | 50,057 | 5.49% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of January 31, 2026. The top two/bottom two categories per period are highlighted. The performance data quoted represents past performance. Past performance does not guarantee future results.
The lack of interest in owning long-term US Treasurys is not a January 2026 phenomenon. This trend has emerged over the past year and is reflected in the trailing three-month flow trend (Figure 6). With outflows over the past few months, the rolling three-month figure plummeted below the 20th percentile to reside at its second-lowest point ever.
Catalysts for a reversal are in short supply as well. Alongside pressures from rising deficits, inflation upside risks, and rising term premiums, the potential incoming new Fed chair Kevin Warsh has been a critic of the central bank’s balance sheet and has argued that it should be much smaller.2
Any actions to reduce the Fed’s balance sheet (via curtailed asset purchase and reinvestment plans) could place undue pressure on long-term yields. There also could be a mix shift of the weighted average maturity of the balance sheet that skews toward shorter maturities to be more aligned with central bank liabilities. So, in all, potentially less buying on the long end could push long-term rates up.
In today’s market, it’s one battle royale after another
Not every data point or action needs an equal reaction. History, for both the market and the rumble, shows that success isn’t about perfect timing. It’s about endurance. Wrestlers who go wire to wire combine stamina with discipline. They are able to absorb risks without abandoning their strategy when conditions get uncomfortable—like having the dexterity to let only one foot touch the ringside floor.
The same goes for portfolios. In the current environment, endurance doesn’t mean taking it easy for a few sessions (i.e., going to cash) or making the same moves and concentrating solely on the recent winners. It means balance and preparation since leaders and losers change frequently.
Being balanced and resilient in the market’s ring has worked to start the year. Stocks, bonds, and commodities are all up to start 2026,3 despite the blitz of headlines, earnings reports, shifting policy regimes, AI-hype, macro data, and increased cross-asset volatility. Cross-asset markets are just rumbling along—one battle royale after another, headline by headline, data point by data point, policy action by policy action.
While you can’t predict whose music will hit next—a rate decision, a growth scare, a geopolitical shock—you can prepare for it. Maintaining diversification across assets, sectors, geographies, and economic environments (i.e., with inflation-sensitive assets) helps portfolios remain resilient no matter what comes next. In a market defined by constant entrants and few pauses, preparation remains the most reliable way to stay in the ring.