May ETF Asset Report: Quality U.S. Equities Win

The month of May has been all about trade war fears, which renewed threats of recession all over again. It all started with the Trump administration lifting tariffs on $200 billion worth of Chinese goods from 10% to 25% on May 10 and China announcing a retaliatory move — a tariff hike on $60 billion worth of American goods to 25%, starting Intensifying Trade Woes Trigger Rally in Treasury ETFs ).

Let's see how these events impacted asset growth in the ETF industry in May (as of May 24, 2019) (per etf.com ).

Low Volatility and Quality ETFs Sizzle

Quality and low volatility ETFs have been on the radar as investors flocked to iShares Edge MSCI Min Vol U.S.A. ETF QUAL . The funds garnered a respectively $1.92 billion and $1.68 billion in assets in the month.

Despite losses, iShares Core S&P 500 ETF (ITOT ) have added about $1.34 billion, $965.7 million and $661.9 million in assets. This was a confirmation of solid investor confidence in U.S. equities. A dovish Fed and improved domestic growth amid the developed market pack have led to solid fund flow.

Total Bond Market in Investors’ Favor

As flight-to-safety plays dominated global markets, the benchmark 10-year U.S. Treasury note yield slumped to 2.32%, down from 2.52% seen at the start of the month. Some key parts of the yield curve are inverted. Benchmark 10-year yield slipped below the one-year mark which signals an impending recession. The 10-year Treasury yield slumped to a 19-month low

Since bond yields react negatively to prices, bond ETFs rallied in anticipation of a slowing U.S. economy. Vanguard Total Bond Market ETF BND and iShares Core U.S. Aggregate Bond ETF (ASX:AGG) attracted about $1.14 billion and $1.08 billion, respectively. Higher current income and safety favored the funds.

ESG ETF Gains

iShares ESG MSCI USA Leaders ETF (6 ESG ETFs Beating SPY (NYSE:SPY) This Year: Is There More Room to Run? ).

Emerging Market Under Pressure on Trade Woes

iShares MSCI Emerging Markets ETF (NYSE:EEM) Markets & ETFs Digest Trade Spat: Is It a Dead-Cat-Bounce? ).

Corporate Bonds lost Appeal

Both iShares iBoxx USD Investment Grade Corporate Bond ETF (JNK ) fell out of investors’ favor as a respective of $1.54 billion and $739.7 million in assets gushed out of the funds.

Japan Lost Luster

iShares MSCI Japan ETF (Japan's Economy Beats Growth Forecasts: ETFs in Spotlight ).

Financial Sector Shed Assets

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As long-term bond yields are falling faster than short-term ones, net interest rate margins of banks started contracting. As a result, Financial Select Sector SPDR Fund XLF saw $970.6 million in assets leaking out of the fund.

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