The stock market’s best quarterly surge since 2012 has largely been ignored by buyers of exchange-traded funds.
These investors continue to shun the S&P 500, despite the index’s 12 percent gain, instead pouring $33 billion into fixed-income funds, data compiled by Bloomberg show. That’s more than double the $15 billion absorbed by stock ETFs in the quarter through March 27, and the largest ratio of flows into bonds over equities in three years, the data show.
Stocks are rallying after their worst quarter in seven years and investors who got burned appeared reluctant to trust that the pain is over. Weak economic data across global markets and an even more dovish stance from the U.S. Federal Reserve have meanwhile inflamed recession fears, pushing many into safer strategies.
“I don’t think we need to complicate the rush toward bonds,” Frances Donald, head of macroeconomic strategy with Manulife Asset Management, said in an interview at Bloomberg in New York. “You need to contend with the fact that 2020 growth will be substantially slower. That’s a very difficult environment for equities to be in.”
Natural Reaction
Equity ETFs started the year with outflows as investors digested a December plunge that took stocks within a whisker of a bear market. January has often been a tough month for such funds as advisers seek to minimize client tax bills, analysis from Bloomberg Intelligence shows. But interest remained subdued in February and March, flows show. Debt funds have by contrast added money for five straight months.