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ETFs Drive 2019 Bull Market: Fund & Stock Plays

Sanghamitra Saha

The ETF industry is growing by leaps and bounds with product introductions. There has been novelty when it comes to themes. Immense popularity within just 25 years testifies to this growth. All these have taken the U.S. listed ETF tally to 2,251 from around 138 fund sponsors, as per xtf.com. Total assets under management is around $3.75 trillion.

ETF Industry Drives 2019 Bull Market

U.S. markets have been in great shape in 2019, thanks to a dovish Fed and U.S.-China trade optimism. The S&P 500 has recovered sharply this year from the Christmas lull. The S&P 500 touched 2,800 for the first time in nearly four months, while the Dow Jones hit its 26,000 mark in late February for the first time since Nov 9 (read: Wall Street's Best Start Since 1987: Top ETFs of Top Sectors).

It has been noticed that the ETF industry has been contributing to this year’s bull market materially. The number of ETFs has increased by about 0.5% so far this year, while assets have swelled by 10.2%. This comes against about 4.3% asset gains seen during this period last year. The industry saw about $18.02 billion of net inflows this year. In February, assets grew 2.9% sequentially to about $105.06 billion, marking net inflows of $21.98 billion (read: ETF Industry to Hit Record by 2020: Stocks & ETF to Gain).

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On the other hand, investors dumped U.S. equities to the extent of $1.481 billion between Feb 25 and Mar 1, Bank of America Merrill Lynch data show. This is in stark contrast to $854 million of inflows that the ETFs witnessed last week, marking a $168 million jump from the prior week. Apart from ETFs, buybacks have also been pushing markets higher (read: Low-Volatility ETFs in the Pink Despite a Bull Market).

More Growth in the Cards?

Industry players are leaving no stone unturned to keep the space hot. Slashing fees at record low levels have been a trend. The first zero-expense ratio ETF will likely be launched this year. Apart from the low-cost structure, hot themes and an efficient portfolio structure also played big roles in garnering investors’ assets. The demand for actively managed ETFs has also been increasing globally, so has ETF issuances (read: Zero-Fee ETFs to Hit the Market Finally?).

Stock & ETF Beneficiaries

ETF in Gain

ETF Industry Exposure & Financial Services ETF TETF

The underlying Toroso ETF Industry Index looks to offer exposure to publicly traded companies that derive revenues from the Exchange Traded Funds ecosystem. The fund charges 64 bps in fees. So far this year (as of Mar 5, 2019), the fund is up 12.4% (beating the S&P 500 by a slight margin) and may gain further in the coming days.

Stocks to Gain

Virtu Financial Inc. VIRT

The Zacks Rank #1 company offers a technology platform through which it provides quotations to buyers and sellers in securities. It hails from a top-ranked Zacks industry (top 32%).

LPL Financial Holdings Inc. LPLA

This Zacks Rank #2 (Buy) company is engaged in providing an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. The stock belongs to a top-ranked Zacks industry (top 36%).

MSCI Inc. MSCI

This is an independent provider of research-driven insights and tools for institutional investors. Though the stock has a Zacks Rank #3 (Hold), it belongs to a top-ranked Zacks industry (top 30%) and sector (top 31%). The stock also has a good Growth Score of B.

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MSCI Inc (MSCI) : Free Stock Analysis Report
 
LPL Financial Holdings Inc. (LPLA) : Free Stock Analysis Report
 
Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
 
ETF Industry Exposure & Financial Services ETF (TETF): ETF Research Reports
 
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