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ETF Asset Report of June

·4 min read

Wall Street delivered an awful performance in June. The S&P 500 (down 6.9%), the Dow Jones (down 5.4%), the Nasdaq (down 6.8%) and the Russell 2000 (down 7.3%) – have all given an extremely downbeat performance.

The combination of factors such as 40-year high U.S. inflation, renewed Coronavirus cases in various parts of the world, the Russia-Ukraine war and the Fed’s aggressive tightening policy are weighing heavily on investor sentiment.

The sell-off in the S&P 500 Index aggravated when the Fed raised interest rates by 75 bps in its latest FOMC meeting — the biggest increase since 1994 — and signaled continued tightening ahead, which could further weigh on risk-on trade sentiments. The U.S. yield curve again inverted in June after April, giving cues of a likelihood of a recession.

Another Fed rate hike of 50 or 75 bps at the next meeting in July is likely. An increase in interest rates means higher loan rates for consumers and businesses, which in turn hurt economic growth. On the economic data front, U.S. retail sales unexpectedly fell 0.3% sequentially in May of 2022, marking the first decline so far this year. It follows a downwardly revised 0.7% increase in April, as high inflation, gasoline prices and borrowing costs hurt spending on non-essential goods.

Against this backdrop, below we highlight a few ETFs that fetched sizable assets in June.

S&P 500 Win

Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF IVV amassed about $7.88 billion and $3.65 billion in assets in June. Corrections in valuations probably led the S&P 500 to garner investors’ attention in the year. iShares Core S&P Total U.S. Stock Market ETF (ITOT) and Vanguard Total Stock Market ETF VTI too fetched about $3.68 million and $1.96 billion in assets.

U.S. Short-Term Treasuries in Fashion

SPDR Bloomberg 1-3 Month T-Bill ETF BIL and iShares Short Treasury Bond ETF SHV added about $2.0 billion and $1.81 billion in assets, respectively. We believe cash and short-dated fixed income play a greater role in adding stability to a portfolio. This is especially true given that the Fed will keep on hiking rates this year and short-term bond yields will rise alongside.

High-Dividend Products in High Demand

Vanguard High Dividend Yield ETF (VYM) (yields about 3% annually) fetched in about $1.69 billion in June. High dividend is a great attraction for investors in the current edgy market.

Value: A Winning Corner

Vanguard Value ETF VTV hauled in about $1.15 billion in assets in June. A hawkish Fed increased benchmark U.S. treasury bond yields in the year to as high as more than 3%. This has brought back investors’ favor to the value corner of investing as value stocks fare better in a rising rate environment.

High Yield Bonds Out of Favor

Both iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD) and iShares iBoxx USD High Yield Corporate Bond ETF HYG lost about $2.31 billion and $1.59 billion in assets in the month. As yields on U.S. treasuries gained a lot, high-yield bonds fell out of favor.

Financials Out of Fashion

Financial Select Sector SPDR Fund XLF lost about $1.52 billion in assets as yield curve flattened/ inverted many times in the quarter. While the Fed continued to hike rates (enacted two rate hikes in the quarter) resulting in a spike in the short-term rates, recessionary fears suppressed the long-term bond yields in the quarter. This is a negative scenario for the financial stocks and ETFs.

Gold Lost Luster

SPDR Gold Trust GLD too has seen assets worth of $1.0 billion gushing out of the fund. Since the greenback continued to gain this year, gold (which is priced in the greenback) lost its value.

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SPDR Gold Shares (GLD): ETF Research Reports
iShares iBoxx High Yield Corporate Bond ETF (HYG): ETF Research Reports
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
Vanguard Value ETF (VTV): ETF Research Reports
iShares Short Treasury Bond ETF (SHV): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
SPDR Bloomberg 13 Month TBill ETF (BIL): ETF Research Reports
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Zacks Investment Research