September has been a shaky month for both the equity and the fixed-income world, urging investors to jump into the spaces.
U.S. Equity Tops
Despite the fact that volatility continued to dominate the broader stock market in September with China-led deceleration fears, global growth worries and an uncertain Fed policy, investors' confidence in the U.S. equity market seems unscathed (read: Top ETF Stories of September ).
This is especially true given that the U.S. economy is on a firmer footing, and could easily withstand international woes. Most economic data points have confirmed this trend. The third estimate of Q2 GDP data came in much higher than the second and the initial estimates, the housing market is improving, consumer confidence is rising, and the unemployment rate dropped to a seven-and-half year low.
Further, the delay in increase in interest rates will drive U.S. stocks higher as the near-zero rates have allowed the domestic stock market to complete a spectacular six-year bull-run. Though lower oil price is hurting its sector earnings and creating deflationary pressures, it is leading to fatty wallets and increased consumer spending. Moreover, the recent market sell-off has made the stocks cheap at the current levels, suggesting attractive entry points.
As a result, the bullish sentiment for the U.S. stocks remains intact, compelling investors to continue betting on the equity world. As such, huge money flowed into the U.S. equity funds as per ETF.com last month, which we have highlighted in detail below:
The ultra-popular SPDR S&P 500 ( SPY ) led the way last month, gathering about $6 billion in capital. This took the fund's asset base to around $163.5 billion. The ETF provides exposure to the large cap segment of the broad U.S. equity market by tracking the S&P 500 index, and holds 507 stocks in its basket. Apple ( AAPL ) occupies the top position with nearly 3.7% share while other firms do not hold more than 2.09% of total assets (read: ETFs to Buy on Blockbuster Apple 3D Touch iPhones Sales ).
The fund is widely spread across a number of sectors with information technology, financials, health care, consumer discretionary and industrials accounting for double-digit exposure each. The product charges 9 bps in fees per year and trades in average daily volume of more than 125 million shares. The fund lost 3.3% last month and has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.
Another top asset gainer was from the small cap segment - iShares Russell 2000 ( IWM ) . The fund pulled in more than $2.1 billion last month, propelling the total asset base to $25.6 billion. The product provides exposure to a broad basket of 1,961 stocks by tracking the Russell 2000 Index. It is well spread out across components as none of these holds more than 0.31% of assets.
Sector wise, financials takes the top spot with one-fourth share, followed by information technology (17.3%), health care (15.2%), consumer discretionary (14.6%) and industrials (12.2%). The product is extremely liquid, trading in average volumes of around 32.7 million shares a day and charging 20 bps in annual fees. It shed 5.3% last week and has a Zacks ETF Rank of 2 or 'Buy' rating with a High risk outlook.
Vanguard S&P 500 ( VOO ) achieved the third position, accumulating over $1.8 billion in capital, sending its total AUM to nearly $33.6 billion. This is also a large cap centric fund tracking the S&P 500 index. Holding 504 stocks in its basket, the fund has well diversified approach across number of components. None of the securities accounts for more than 3.7% of assets while the top four sectors - information technology, financials, health care, and consumer discretionary - make up for double-digit allocation each (see: all the Large Cap ETFs here ).
VOO is the low cost choice in the large cap space, charging just 5 bps in fees and expenses. Volume is solid exchanging about 2 million shares a day on average. The fund was down 3.3% in September.
Treasury Also Rocks
While investors flocked to riskier assets, a bout of uncertainty compelled investors to take a flight to safety. In particular, iShares 1-3 Year Treasury Bond ETF ( SHY ) with AUM of around $13.1 billion and average daily volume of 1.8 million shares, gathered more than $1.1 billion in its assets. This fund targets the short end of the yield curve with average maturity of 1.80 years and effective duration of 1.77 years. The ETF charges 0.15% in annual fees and was up modestly 0.3% last month. It has a Zacks ETF Rank of 3 with a Low risk outlook (read: Guide to Interest Rate Hikes and ETFs ).
Other popular Treasury ETFs like iShares 7-10 Year Treasury Bond ETF ( IEF ),iShares 20+ Year Treasury Bond ETF ( TLT ) and SPDR Barclays 1-3 Month T-Bill ETF ( BIL ) saw substantial inflows of $898 million, $890 million and $785 million, respectively. IEF focuses on mid-term Treasuries with average maturity of 8.51 years and effective duration of 7.65 years. The fund gained 1.4% last month and has a Zacks ETF Rank of 3 with a High risk outlook.
The average maturity of TLT, which targets the long end of the yield curve, comes in 26.76 years and effective duration is 17.43 years. The ETF was up 1.2% and has a Zacks ETF Rank of 2 with a High risk outlook. BIL provides exposure to very short-term Treasuries with average maturity and effective duration of 0.09 years each. It delivered flat returns and has a Zacks ETF Rank of 3 with a Low risk outlook.