During the week ended Nov 16, 2017, U.S. listed equity ETFs registered $5.4 billion in inflows, per Factset. Year-to-date ETF inflows have reached $398 billion.
Of the weekly inflows, U.S. equity ETFs registered $3.7 billion in inflows, while international equity ETFs saw inflows of $1.6 billion.
What’s Driving the Markets?
The markets are somewhat optimistic about developments in the tax reform, with the House passing the bill. This drove inflows in equity funds listed in the United States.
It has been observed that many investors have developed a dislike for some of the features of active funds such as higher fees and lack of liquidity. This has been driving growth in the ETF industry. Moreover, per a pionline article, citing Ernst and Young industry research report, institutional investors are expected to drive growth in ETF assets, which is expected to grow 73% by 2020.
However, major indices edged lower last week as political uncertainty loomed over the tax reform. Although the House approved their version of the bill, there are significant differences in the bill from the Senate’s version. Markets are therefore worried that this could create hindrance in the timely passing of the legislation.
One significant difference between the two versions is the Senate’s plans to tax stock options when employees receive them and not when they exercise them. Moreover, the two versions differ significantly in regard to their treatment of the estate tax.
Let us now discuss a few ETFs focused on providing exposure to U.S. equities.
SPDR S&P 500 ETF (SPY – Free Report)
This fund is the most popular ETF traded in the U.S. markets. It seeks to provide exposure to the largest and most stable companies and tracks the S&P 500 index.
It has AUM of $250.5 billion and charges a fee of 9 basis points a year. From a sector look, the fund has high exposures to Information Technology, Financials and Health Care with 24.7%, 14.4% and 14.0% allocation, respectively (as of Nov 22, 2017). The fund’s top three holdings are Apple Inc (AAPL – Free Report) , Microsoft Corporation (MSFT – Free Report) and Amazon.com Inc (AMZN – Free Report) with 4.1%, 2.9% and 2.1% allocation, respectively (as of Nov 22, 2017). The fund has returned 17.5% in a year and 16.5% year to date (as of Nov 24, 2017). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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