Stretch run for ETF flows and the market

Track shifting investor sentiment through our latest ETF flows analysis.

Major League Baseball playoffs are a pressure cooker. They can highlight weaknesses and expose a team’s flaws in an instant. One bad inning can upend a regular season of winning. It doesn’t matter if you won 100 regular season games, a hanging curveball to a pinch hitter in the bottom of the ninth can send even the best teams home in the playoffs.

For markets, the first nine months of 2025 have been a grind—much like a baseball team’s regular season. After battling through Liberation Day drawdowns, markets rallied on catalysts like Artificial Intelligence, fiscal stimulus, and anticipated rate cuts from the Federal Reserve and other central banks.

But just like October baseball, the final stretch of the year can be unforgiving. Risks intensify, the spotlight grows brighter, and past performance offers no guarantees. The team with the best regular season record doesn’t always win the World Series, and similarly, flow trends and portfolios that thrived through the first nine months of 2025 could still face turbulence.

Inflows on the verge of $1 trillion

After taking in $149B in September (second most all-time), US-listed ETFs now have over $946B in inflows so far this year—just shy of the $1T mark.

Based on this current pace, ETFs could top $1T by October 15. Mark it down.

October 15 would be the fastest ETFs ever reached $1T in calendar-year flows, far outpacing the feat from 2024, when they hit $1T on December 11. Extrapolating from the current daily average, ETF inflows could reach a record $1.27T by the end of the year (Figure 1).

Accounting for the typical seasonal boost seen in November/December—stemming from a variety of tax, derivative, and behavioral factors—2025’s total could reach $1.35T.

That’s if those historical seasonal patterns emerge as expected and the market remains well-behaved (something that is not guaranteed if a prolonged US government shutdown impacts growth and sentiment).

Despite forecasts for even stronger inflows and performance, some year-to-date and September trends indicate that investors are still seeking resilience amid a myriad of cloudy macro forces.

For example, US-listed gold ETFs added a record $10.1 billion in September, far outpacing the COVID-era April 2020 record of $7.2 billion (Figure 2). And with $35 billion year to date, US-listed gold ETFs have already surpassed the full-year record of $29 billion from 2020.

While anything can happen in today’s market given the confluence of conflicting and confusing headlines, gold ETF inflows may be supported as both macro (weakening dollar, falling rates, stubborn inflation, rising deficits, geopolitical flash points, shutdown impaired growth) and fundamental forces (central bank demand, retail demand) continue to benefit the spot price.

As a result, 2025 could be a record year for gold ETF inflows.

Sentiment signals risk-on down the stretch

Sector trends show investors taking a risk-on approach down the stretch. Sectors had $8 billion in inflows in September, led by $6 billion in inflows into cyclical sectors. Industrials led within that cohort, with $2.7 billion in inflows for the month.

The inflows from September put Industrials in the lead over the past three months (+$4.7 billion). That’s just ahead of Financials (+$4.1 billion), a cyclical sector that saw $700 million of inflows in September.

Outside of cyclicals, Tech-plus sectors (Communication Services and Information Technology sectors) had modest inflows. Meanwhile, Defensives had outflows in September, led by Utilities (-$121 million) and Health Care (-$4 million). Health Care has now had outflows in 14 consecutive months (the longest stretch on record) and 18 out of the past 19 months.

With cyclicals leading the charge, sectors have now had inflows for five consecutive months. Over the past five months, investors have deposited $20 billion into sector exposures. This is after redeeming $19 billion leading up to and after Liberation Day.

After these five months of sizable inflows, sectors are back in positive territory on the year—a sign that risk-on sentiment and sector-specific alpha positioning are back (Figure 4).

Bond flows highlight curve positioning and resilience

Curve positioning indicates investors’ preference for the short to intermediate portion of the curve. Long-term bonds represent just 13% of the government bond ETF inflows in September and only 7% of year-to-date inflows as term-premiums rise and the curve steepens.

This mirrors the trend in the target maturity market—a slice of the bond ETF industry that cuts across multiple bond sectors and can remove the bias of ultra-short government flows stemming from defensive, and not curve, positioning.

Across all considered periods there is a lack of interest in long-term exposures, including in September when the short and intermediate segments had a combined $1.6 billion in inflows.

Inflation positioning also continued in September. Following continued stubborn prints and the potential for policy actions to have a stimulative effect on prices, inflation-linked bond ETFs (IL bonds) posted their ninth month in a row with inflows (+$1.6) billion and now have taken in $10 billion on the year. This is IL bonds’ longest streak since 2021. And this allocation has been rewarded so far in 2025, as US IL bonds have outperformed duration equivalent nominal US Treasurys by 1.4% year to date.¹

Building a deeper bench for the next big innings

New macro risks like the US government shutdown are being stacked on top of the existing risks of tariffs, geopolitical events, rising deficits, and a slowing labor market.

Of course, investors can gameplan for a more difficult, pressure-filled final three months of the year. Just like a baseball manager uses lefty-righty platoons to exploit pitcher-hitter matchups, investors can make smart, in-game adjustments.

For baseball and portfolios, these adjustments require strong foundations. If a team has a terrible bullpen, it won’t matter which reliever is brought in. Strong portfolios, like strong teams, need both stars and role players.

That means, in addition to stocks and bonds, including real assets like commodities and gold, as well as inflation-linked bonds and regional diversification can help navigate the pressure of the market’s playoff season.

With that foundation in place, investors can make tactical adjustments to respond to the current environment. Today’s portfolio pinch hitters might include rotating toward sectors with strong fundamentals and macro support (i.e., Financials), pivoting toward industries with more secular and geopolitical tailwinds (i.e., Aerospace & Defense), or seeking different forms of diversification (i.e., multi-asset strategies).

After all, the last out is always the hardest to get in the “big innings,” and making the right adjustment can make all the difference. Just like the Dodgers bringing in Kirk Gibson in the bottom of the ninth to face Dennis Eckersley in the ninth inning of Game 1 of the 1988 World Series.

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