U.S. Equities See Record Outflows: ETFs In Focus

U.S. equity funds witnessed outflows of $30 billion since late June through August 23, 2017, per a Bank of America (NYSE:BAC) report citing EPFR Global data. Funds saw investors pulling out $2.6 billion in the 10th consecutive week, the longest stretch since 2004.

The primary reason for these outflows is being attributed to the rising political uncertainty in the United States and growing doubt over whether President Donald Trump will be able to implement his pro-growth policies.

Moreover, despite speculation on developments being made in the tax reform plan by Trump’s administration, his Charlottesville comments, where he stated that both sides were to blame in the protests, was a negative for his approval rating.

Also, Trump’s most-recent comment in a rally in Arizona, where he stated his willingness to shut down the federal government to secure funding for the border wall, has given birth to a new fear in the market.

Investors instead shifted to European and Japanese stocks, the report cited. Treasury bonds have seen inflows in the 10-week timeframe amounting to a record $900 billion. Moreover, the appeal of Japanese investments as a safe-haven investment has recently increased.

Most recently, Kim Jong-Un launched a ballistic missile that passed over Japan as North Korea’s threats come amid increased tensions with the White House. Trump in his response to increasing tensions with North Korea had earlier stated that the threats will be met with ‘fire and fury’, which rattled the markets.

Japanese investors preferring domestic investments in order to avoid being exposed to currency risks have made the yen rally. However, increased geopolitical risks weigh on the markets and getting exposed to any potential target is not a very informed choice. Moreover, the dollar has also been falling lately, owing to uncertainty around future rate hikes by the Federal Reserve.

However, the U.S. economy seems to be in good shape currently. GDP in Q2 grew 2.6% owing to a boost from trade. Strong consumer confidence is also reflective of optimism in the economy, as it hit a 16-year high of 121.1 in July compared with 118.9 in June.

Let us now discuss a few ETFs focused on providing exposure to U.S. equities.

SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY)

This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index (read: 5 Smart Beta ETFs With Brilliant Returns).

It has AUM of $242.13 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 23.25%, 14.47% and 14.30% allocation, respectively (as of August 25, 2017). The fund’s top three holdings are Apple Inc (NASDAQ:AAPL) , Microsoft Corporation (NASDAQ:MSFT) and Facebook Inc (NASDAQ:FB) with 3.98%, 2.68% and 1.88% allocation, respectively (as of August 25, 2017). The fund has returned 12.01% in the last one year and 8.88% year to date (as of August 28, 2017). It currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: U.S. Producer Prices Down: ETFs in Focus).

iShares Core S&P 500 ETF IVV

This fund is a low-cost ETF that seeks to provide exposure to the large established U.S. companies and tracks the S&P 500 index.

It has AUM of $121.05 billion and charges a fee of 4 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 23.16%, 14.42% and 14.26% allocation, respectively (as of August 25, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation and Facebook Inc with 3.97%, 2.68% and 1.87% allocation, respectively (as of August 25, 2017). The fund has returned 12.66% in the last one year and 9.44% year to date (as of August 28, 2017). It currently has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: The S&P Will Double Within the Next 5 Years).

PowerShares QQQ ETF QQQ

This fund is a popular ETF that maintains a hefty exposure to U.S. tech companies and tracks the Nasdaq 100 index.

It has AUM of $51.07 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Information Technology, Consumer Discretionary and Health Care with 58.97%, 21.61% and 11.10% allocation, respectively (as of August 25, 2017). The fund’s top three holdings are Apple Inc, Microsoft Corporation, and Amazon.com Inc (NASDAQ:AMZN) with 12.50%, 8.43% and 6.77% allocation, respectively (as of August 25, 2017). The fund has returned 21.22% in the last one year and 19.48% year to date (as of August 28, 2017). It currently has a Zacks ETF Rank #2 with a Medium risk outlook.

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