Some of the hottest trades of a tumultuous 2019 are falling out of favor as investors dip their toes into riskier waters.

From low-volatility stocks to bonds and gold, the safety trade that reigned among exchange-traded fund investors is unraveling on signs of a rebounding economy and progress in U.S.-China talks. Traders are rushing to pockets of the market that should outperform in the event of an economic acceleration.

“People are starting to feel better that the economy isn’t going to go into a recession in 2020,” said Ryan Nauman, market strategist at Informa Financial Intelligence’s Zephyr. “That’s what’s driving those flows.”

Below are examples of the rotation sweeping the $4 trillion ETF market:

Low Volatility

After 16 straight months of inflows, the beloved low-volatility trade of 2019 is starting to show some cracks. In aggregate, ETFs tracking stocks that swing less than the broader market have taken in over $22 billion for a record year, Bloomberg Intelligence data show. But investors have pulled near $600 million from the funds in November, putting them on track for the biggest monthly outflows since February 2018.

Much of those withdrawals have stemmed from the $12.4 billion Invesco S&P 500 Low Volatility ETF, which is experiencing its worst month of outflows in six years, data compiled by Bloomberg show.


Investors are souring on momentum ETFs too, or those that bet the past year’s winners will keep on winning. The funds lost $1.6 billion in October, the most for any month on record, according to Bloomberg Intelligence data. The exodus has continued in November, with investors pulling about $270 million.


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