US equities provide rocket fuel for record ETF flows in November

All roads led to Wall Road in November because the US fairness market dominated a document month for the worldwide change traded fund business.

Internet flows into ETFs globally hit $205bn in final month, in accordance with BlackRock, outstripping the earlier document of $199bn set in July.

But US fairness ETFs accounted for a document $149bn of this — nicely forward of the earlier peak of $98.5bn in December 2023 — as just about each different nook of the funding universe was floor into the mud by the onward march of Wall Road.

Mounted earnings ETFs pulled in an anaemic $35.1bn, comfortably beneath October’s $49.9bn, whereas commodity ETFs suffered web outflows of $3.6bn as buyers pulled cash out for the primary time since April.

Non-US fairness markets had been equally out of favour, with $5.1bn stripped from European fairness ETFs, $2.9bn from Japanese inventory funds and $3.8bn from their rising market friends — the primary time all three markets have recorded concurrent month-to-month outflows since Might 2019, in accordance with BlackRock.

The surge into the US inventory market was pushed by Donald Trump’s clear victory within the US presidential election, which constructed on already robust market momentum.

November was a “historic month”, mentioned Karim Chedid, head of funding technique for BlackRock’s iShares within the Emea area, with “the massive theme rerisking from buyers in a month the place we have now had readability across the end result of the US election”.

Chedid mentioned this constructed on robust sentiment emanating from the lately concluded earnings season, which delivered 7 per cent year-on-year earnings, comfortably forward of subdued expectations of three per cent, alongside a widening hole in financial knowledge between the US and a weaker Europe.

Matthew Bartolini, head of SPDR Americas analysis at State Road International Advisors, mentioned this transatlantic gulf was wider nonetheless in fairness markets, with the S&P 500’s post-election leap of 6 per cent in November taking its year-to-date positive factors to 26 per cent, whilst a post-election wobble in European equities amid fears of upper tariffs trimmed year-to-date returns to five per cent.

This 21 proportion level return differential is the very best for 15 years, Bartolini mentioned. This “illustrates how there’s extra to the US’s reign than the current post-election rally narratives,” he added.

“For starters, the US has had stronger basic momentum in 2024. Ahead-looking sentiment is robust too. The US is projected to have stronger earnings progress in every of the following 4 quarters — 6 proportion factors, on common — than the remainder of the world.”

Amid this backdrop, some European buyers look like giving up on their home bourses: web purchases of Europe-listed US fairness ETFs hit a document $23.2bn in November, BlackRock mentioned.

“Buyers abroad jumped on the alternative to extend publicity to the US inventory market,” mentioned Syl Flood, senior product supervisor at Morningstar, with the Eire-domiciled iShares Core S&P 500 ETF USD (CSSPX) pulling in $4bn, $1bn greater than its earlier month-to-month document, set in January.

Bartolini, whose evaluation solely covers US-listed ETFs, mentioned that the rolling three-month move differential between US and non-US fairness ETFs hit an “eye-popping” $188bn, one other document.

Whereas ETFs monitoring the blue-chip S&P 500 dominated flows, as ordinary, Chedid famous that extra cyclical areas, equivalent to small and mid-cap shares and financials, additionally noticed robust shopping for, mirroring the sample within the wake of Trump’s earlier election victory in November 2016.

His undisputed re-election “has eliminated the uncertainty premium for markets,” Chedid mentioned, whereas additionally doubtlessly ushering in lighter regulation, notably for monetary shares.

“Buyers positioned unusually giant sums with financials-focused ETFs,” mentioned Flood, with month-to-month flows topping $9.4bn, yet one more document.

“The Monetary Choose Sector SPDR ETF (XLF), the most important financials sector fairness ETF at $51bn, noticed document flows of $4.1bn” despite the fact that greater than $1bn of this was withdrawn within the first three days of December, he added.

“Buyers made an excellent bigger proportional wager on SPDR S&P Regional Banking ETF (KRE); it grew by a 3rd on account of November’s flows of $1.4bn”.

Flood additionally famous that Eire, Europe largest ETF domicile, noticed document inflows of $31.5bn (taking property to $1.6tn), with the whole lot of this cash being pumped into equities.

And though US-domiciled fastened earnings ETFs did see inflows, Bartolini calculated that fairness minus bond trailing three-month flows hit yet one more document.

Just about the one different asset that did see a great month was cryptocurrency. Morningstar’s listing of the highest 10 ETFs by flows in November was dominated by US fairness automobiles with the only real exception being the iShares Bitcoin Belief (IBIT), nestled in fifth with $5.8bn of web new cash as Trump election ushered in a recent wave of enthusiasm for digital property.

The large query now’s whether or not Wall Road can preserve its excessive ascendancy, or whether or not flows will turn out to be just a little extra balanced.

“That’s an enormous query that shoppers ask us,” mentioned Chedid. “In our view there are fundamentals that drive that choice for US equities. We see some selective alternatives coming by in different elements of the world, however we do want to emphasize the phrase ‘selective’,” he added, noting that “this yr has been respectable for UK equities”.

And whereas continental Europe “has been considerably weaker by way of flows”, amid “a structural decline in manufacturing exercise” a service sector restoration that has “fizzled out” and an unhelpful geopolitical backdrop, Chedid did notice that actively managed European fairness ETFs had seen web shopping for, one thing he attributed to buyers looking for out such selective alternatives.