United States ETF inflows fell sharply in August as stock market volatility rose to its highest levels since the worst days of the global financial crisis in 2008. What does this mean?
Most investors pulled money from equity during the month of August, choosing commodity and real estate ETFs and headed for the relative safety of bonds. Fixed income ETFs gathered inflows of $4.7bn in August, compared with $2.6bn in July. According to Financial Times, a short maturity bond ETF was the second most popular choice for ETF investors in August with the SPDR BarCap 1-3 month bill ETF, known as BIL, attracting inflows of $2.1bn.
While United States inflows did fall, the sharp swings during the month have also served to re-ignite the debate over whether the growing popularity of ETFs could be contributing to an increase in stock market volatility.
Pundits, investors, academics and analysts have all suggested that the growth of ETFs and index funds has resulted in an “increased commonality of trading” where the simultaneously buying or selling of all of the constituents of an index forces them to move together during the trading day.
We will see what develops in September, but either way, ETFs remain a great way to build a very diversified portfolio, especially if you get invested in the right ones.