Exchange-traded Funds are powering high as investors continue to bet on the U.S stock market on optimism over stimulus and earnings amid the tepid environment fuelled by COVID-19. ETF trading volumes have surged in recent weeks as investors look to gain exposure to the broader stock market with exposure to some of the biggest and fastest-growing counters.
Surging ETFs Inflows
Assets invested in U.S Exchange-traded funds continue to inch high printing record highs of $4.34 trillion as of June. Investors are increasingly betting on ETFs taking advantage of a recent recovery in the equity markets. While COVID-19 has threatened to erode investors’ confidence about equity investments, stimulus from the Federal Reserve and Congress has all but continued to strengthen sentiments about equity investments.
In June U.S ETFs attracted net inflows amounting to $57.59 billion. Fixed net income ETFs/ETPs reported net inflows amounting to $28.8 billion with net year to date inflows surging to $83.5 billion. Equity ETFs, on the other hand, attracted net inflows amounting to $17.7 billion with year to date inflows increasing to $39.8 billion.
A surge in net inflows can be attributed to a stable stock market that has continued to edge higher amid the shocks triggered by the COVID-19 pandemic. The FED calming the markets with a wave of stimulus plans running into trillion of dollars has bolstered liquidity levels with some of the funds ending up in ETFs specializing in sectors resilient to the COVID-19 disruptions.
E-Commerce ETFs
Exchange-Traded Funds focusing on companies in the e-commerce space have continued to outperform the overall stock market. This is in part because of a shift in shopping patterns that has seen e-commerce companies register booming business. With stocks such as Amazon and eBay powering high investors are increasingly betting on these companies leveraging the power of e-commerce ETFs.
Global X MSCI China Consumer Discretionary ETF (CHIQ) is one such e-commerce ETF benefiting from a change in consumer shopping patterns. The ETF is up by more than 25% for the year thanks to its large exposure to Chines online retail stocks. The ETF has got a lift from policies implemented by the People’s Bank of China and its exposure to Red Chips, P Chips and foreign listings.
Financial services focused ETFs are also powering high amidst the payments evolution taking place around the world. ARK Fintech Innovation ETF (NYSEARCA: ARKF) is one such ETF that is a testament to the growth being experienced in the financial service sector. The ETF has sought to provide investors with exposure to equity securities leveraging advanced technology to offer financial services.
Resurgent Energy Sector
Energy stocks and exchange-traded funds are also seen powering high in the wake of oil prices bottoming from record lows. With crude oil prices touching four-month highs on coronavirus hopes non leveraged energy ETFs led by the likes of VanEck Vectors Oil Services ETF (NYSEArca: OIH) and SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) continue to edge high.
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