U.S. Equities See Record Outflows: ETFs In Focus – Thursday, April 4

U.S. equity funds witnessed outflows of about $10.3 billion in March, per an etf.com article, citing FactSet data. Investors pulled out $22.1 billion of large-cap focused funds. The outflows chart was led by SPDR S&P 500 ETF Trust (SPY – Free Report) and iShares Core S&P 500 ETF (IVV – Free Report) , which witnessed a respective $12.2 billion and $9.8 billion in outflow in March.

The high trading volumes of the popular S&P 500 ETFs also make it an attractive bet to gain short exposure to the markets, which might be one reason for the relative high volatility in fund flows.

However, the damage caused was lesser than the prior month. Net outflows decreased to $2.7 billion compared with $4.4 billion in February. The primary reason for these outflows was the reallocation of capital by investors, owing to the high degree of market volatility and events affecting the markets.

What’s Driving Outflows?

The first quarter was dismal for the United States equity markets. Moreover, Wall Street saw a glum start to the second quarter, with stocks tumbling to record lows amid continued pessimism in the market.

After a correction in early February owing to interest rate and inflation fears, markets recovered some of its losses to end the month on a slightly better note. However, March was not welcoming for stock bulls across the globe, as new concerns started bothering the markets.

President Trump’s plans to impose tariffs on various goods with its major trading partners introduced a sense of fear among investors, as they braced themselves up for a potential trade war.

“The outflows reflect a reallocation of capital given what’s been going on in the market over the past several weeks. There’s a lot of headline risk, which caused the market to hit a bit of a banana peel in the final weeks of the quarter,” per a Market Watch article citing Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors.