January ETF Asset Report: S&P 500 Wins, High-Yield Loses

The month of January was all about Trump bump, cheering the tax reform, reassuring earnings, global economic growth and rising Treasury bond yields. Overall, markets remained upbeat though equities slipped at the end (read: Is it Time to Buy the Dip with ETFs?).

The circumstance left investors pondering where to invest their money and realize gains. Let's see how the start to 2018 impacted asset growth in the ETF industry in the first month of the year (as of January 31, 2018) (per etf.com ):

Gainers

S&P 500 Rode Higher

Thanks to upbeat earnings, the S&P 500 hauled in maximum assets. As per the latest Earnings Trends, Q4 results from 228 S&P 500 members that combined account for 54.1% of the index’s total market capitalization have seen total earnings going up 15.9% from the same period last year on 9.1% higher revenues, with 82% beating EPS estimates and 79.8% beating on revenues.

This trend benefited the S&P 500-based ETFs like SPDR S&P 500 ETF Trust (AX:SPY) , iShares Core S&P 500 ETF IVV and Vanguard S&P 500 Index Fund VOO, which attracted about $13.6 billion, $6.37 billion and $2.48 billion in assets, respectively, in the month. SPDR Dow Jones Industrial Average (SI:SPDR) ETF Trust (V:DIA) grabbed about $1.45 million in assets.

EAFE Gains Too

As the fundamentals are shoring up for the developed markets, investors injected about $2.95 billion in assets in iShares Core MSCI EAFE ETF IEFA.

Emerging Markets a Winner

Since the greenback remained subdued in January, emerging market investments brightened. Apart from this, the fundamentals are pretty pro-growth in emerging markets at the current level unlike in 2013 (famous for taper-tantrum). iShares Core MSCI Emerging Markets ETF IEMG and iShares MSCI Emerging Markets ETF (NYSE:EEM) EEM hauled in about $3.22 million and $3.09 billion in assets, respectively.

Losers

Bonds Fell Flat

U.S. benchmark Treasury yields hit a four-year high in late January amid bets on faster inflation and hawkish comments on growth and inflation from central bank officials in Europe. The jump in 10-year Treasury yields was 2.73% on Jan 30, a level not seen since 2014. Tax reform and an upbeat U.S. economy along with a hawkish Fed and oil price recovery led to the sell-off in the U.S. bond market (read: Is the Global Treasury Bond ETF Rally About to End?).

iShares iBoxx $ High Yield Corporate Bond ETF (TO:HYG) , iShares iBoxx $ Investment Grade Corporate Bond ETF LQD and SPDR Bloomberg Barclays (LON:BARC) High Yield Bond ETF JNK shed about $1.78 billion, $1.76 billion and $1.03 billion in January, respectively. These bond’s high-yield nature did not shine in a rising rate scenario.

Rate-Sensitive Sectors Under Pressure

As yields rose, rate-sensitive sectors like real estate and consumer staples lost appeal. Thus, Vanguard REIT ETF VNQ and Consumer Staples Select Sector SPDR Fund XLP sawrespectivelyabout $759.6 million and $1.17 billion in assets gushing out in January.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>