A Mixed Market
Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.
We are seeing overall tepid volume over the last few weeks signaling that many feel that they are well positioned in this market. Inflows have continued to head into yield oriented ETFs largely led by high yield, corporates, and select dividend funds.
Knight ETF Trading:
ETF Flows: Month to date, Knight led all ETF Securities Brokers with an advertised trade volume of 17.21% while trading in 1160 unique ETFs. (Autex Block Data 3-12-12)
US Equity ETFs: We have seen positive inflows from the buy side into the S&P by use of SPY (SPDR S&P 500 ETF Trust), and RSP (Guggenheim S&P 500 Equal Weight). They were however certainly muted from the larger inflows we were seeing throughout January and February. Selling has been seen in IWM (iShares Russell 2000) as well as DIA (SPDR DJIA Trust). Mixed two sided flows have been seen in QQQ (Powerhsares QQQ Nasdaq 100). Perhaps a shift from value to growth in favor as buyers moved into IWF (iShares Russell 1000 Growth) and out of IWN (iShares Russell 2000 Value).
Fixed Income ETFs: Some selling which we are seeing for the first time this year led by outflows in the aggregate bond space as seen in AGG (iShares Barclays Aggregate). Also we are seeing some selling in treasuries including SHY (iShares Barclays 1-3 Year TR), and BIL (SPDR Barclays Capital 1-3 Month). Mixed flows in high yield where we have seen selling in JNK (SPDR Barclays Capital High Yield) and some buying in HYG (iShares iBoxx H/Corp). Similar case with investment grade corporates where the asset class is seeing mixed flows with outflows of LQD (iShares Iboxx Inve Gr Corp), and buying in VCSH (Vanguard S/T Corp Bond ETF), VCIT(Vanguard Int-Term Corp) and VCLT (Vanguard Long – Term Bond). Also to note, we have seen some selling as well in municipal bonds, MUB (iShares S&P Nat Amt –Free Muni) most likely due to the recent pullback.
International ETFs: Positive flows continue into emerging markets, EEM (iShares MSCI Emerging Mkt Index) and VWO(Vanguard Emerging Markets). Looking at regional exposures things were somewhat different with significant selling seen in BIK(SPDR S&P BRIC 40 ETF), BICK (First Truck BICK Index Fund), and SCZ(MSCI EAFE Small Cap). For single countries buying was seen in FXI (iShares FTSE Chine 25 Index) RSX (Market Vectors Russia ETF), EWT (iShares MSCI Taiwan Index FD), and EWY iShares MSCI South Korea). Selling was led by EWZ (iShares MSCI Brazil), EWJ (iShares MSCI Japan) and EWU (iShares MSCI United Kingdom).
Currency and Commodity ETFs/ETNs: General outflows in Gold and Silver seen in GLD (SPDR Gold Trust), IAU (iShares Gold Trust), GDXJ (Market Vectors Jr Gold Miner), and AGQ (Proshares Ultra Silver). Of course oil has been in the news which has led to activity in many oil related funds including USO (United State Oil Fund LP), UCO (Proshare Ult DJ-UBS Crude Oil), and OIL (iPath Goldman Sachs Crude). Steady flows in exposure to agriculture have remained in the last two weeks highlighted in MOO (Market Vectors Agribusiness). For currencies we have seen sell side flows of FXA(Currencyshares Australian Dollar), FXF (Currencyshares Swiss Franc), and FXE (Currencyshares Euro Trust).
Sector ETFs: For sector rotations we are seeing outflows of XLU (Utilities Select Sectors SPDR), XLB (Materials Select Sector SPDR), and IXN (iShares S&P Glbl Tech Sector). Flows have rotated into XLF (Financial Select Sector SPDR), XLE (Energy Select Sector SPDR), FXG (First Trust Consumer Staples) and IYE (iShares DJ US Energy Sector)
Alternative/Specialty ETFs: AMLP (Alerian MLP ETF) was favored by the buy side in the last two weeks with large flows as many look for exposure in Master Limited Partnerships. SPLV (Powerhsares S&P 500 Low Volatility) continues to see its fund grow week over week while dividend oriented ETFs continue to shine including; SDY (SPDR S&P Dividend ETF), DWX (SPDR S&P Inter DVD ETF), and HDV (iShares High Dividend EQ Fund). Rounding out real estate flows VNQ (Vanguard REIT ETF), and ICF (iShares Cohen & Steers) are now seeing some moderate outflows.
You may reach Michael directly at mcafiero@knight.com
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