Yahoo Finance Why Funds Exposed to the US Are Seeing Outflows
Why US Investors Are Seeking Opportunities Overseas (Part 2 of 4)
Why international?
The move to overseas exposure is the opposite of what we saw in the fourth quarter, when the all-time high of $138 billion into ETFs was concentrated in U.S. equities. This makes sense, as the U.S. economy picked up steam and markets responded favorably as 2014 drew to a close. As a result, we started 2015 with the U.S. being a bit stretched in valuations. Couple this with the looming headwinds of rising interest rates, the strong dollar (UUP) putting pressure on U.S. exports and increased labor costs, investors are shifting their focus elsewhere.
Market Realist – Funds exposed to the US are seeing outflows, as equities are facing key headwinds.
The graph above shows the monthly flows for the SPDR S&P 500 ETF Trust (SPY) since the start of 2014. While the ETF saw negative flows in five months in 2014, it ended strongly with inflows of $27.8 billion in the last two months alone.
The fund saw total inflows of $24.7 billion for the year. The robust inflow was due to the relative economic strength in the US, compared to the other major developed economies (VEA), as global stocks (ACWI) struggled.
However, this year so far, the tables have turned. SPY has seen outflows to the tune of $30 billion in the first three months of 2015. The US stocks have been quite volatile (VXX) due to the headwinds noted above. Consumption has been poor in the first quarter of the year, as bad weather affected sales. Also, the West Coast port strike has affected trade, which is also a drag on the economy. These factors could lead to a tepid 1Q15 GDP figure, which could keep stocks–which are already richly valued–subdued.
The rest of the series explains why you should consider international stocks.
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