The global stock market logged in the best year since the financial crisis a decade ago, shrugging off trade tensions and slowing growth in major economies. The stocks added more than $17 trillion in market capitalization in 2019, according to Deutsche Bank calculations (read: Best & Worst ETF Zones of 2019).
Global easing policies, U.S.-China trade deal optimism and political developments around the globe have raised the appeal for riskier assets. As such, overall ETFs gathered about $326.3 billion in 2019, per eftf.com, marking the second-largest annual inflow, just behind the $476.1 billion haul in 2017. U.S. fixed income ETFs led the way, accumulating $135.4 billion followed by inflows of $130.2 billion for U.S. equity ETFs and $32.4 billion for international equity ETFs.
U.S. Equity ETFs: A Hot Spot
Stock markets surged across various countries, with the U.S. market leading the way. In fact, the major bourses logged in the best performance since 2013. The rally was powered by upbeat data, Fed rate cuts, stronger-than-expected earnings and positive developments in trade. The U.S. economy is on a strong growth path with job additions at the fastest pace this year and unemployment dropping to the lowest level since 1969. The housing market is also clearly showing signs of a strong recovery with lower mortgage rates and slower home price growth acting as catalysts (read: 9 ETFs at the Forefront of 2019 Market Rally).
As a result, Vanguard Total Stock Market ETF (VTI was the most loved ETF of 2019, pulling in nearly $15.4 billion in capital. This fund offers exposure to broad U.S. stock market. iShares Edge MSCI Min Vol USA ETF USMV and Vanguard S&P 500 ETF VOO have pulled in more than $12 billion each. USMV targets stocks that have lower volatility characteristics relative to the broader U.S. equity market while VOO invests in stocks in the S&P 500 Index.
Fixed Income ETFs Attracts
The fixed income world gained investors' love amid persistent stock market volatility brought in by trade war, global growth concerns, recession fears and flattening yield curve. Four U.S. fixed income ETFs and one international fixed income ETF claimed spots in the top 10 inflows list: Vanguard Total Bond Market ETF BND, iShares Core U.S. Aggregate Bond ETF AGG, iShares MBS ETF MBB, iShares U.S. Treasury Bond ETF GOVT and Vanguard Total International Bond ETF BNDX. These funds have accumulated $9.7 billion, $8.9 billion, $8.3 billion, $8.3 billion and $11.1 billion, respectively (read: Tax Loss Harvesting & Capital Gains: What ETF Investors Should Know).
International ETFs: Mixed Bag
While iShares Core MSCI EAFE ETF IEFA gathered around $1.4 billion in capital in 2019, iShares MSCI EAFE ETF EFA led the redemptions list with nearly $8.2 billion in outflows. Both ETFs offer exposure to a broad range of companies in Europe, Australia, Asia, and the Far East but tracks different index. IEFA is much cheaper than EFA, charging just 7 basis points in annual fees as against 0.32% in expense ratio for the latter.
Financial & Energy: Laggard Sectors
The ultra-popular ETFs targeting financial and energy sectors were hated by investors last year with Financial Select Sector SPDR Fund XLF and Energy Select Sector SPDR Fund XLE losing $4.4 billion and $3.3 billion, respectively, in AUM. Though financial sector struggled due to recession fears and declining yields in the first nine months of 2019, it saw a solid rebound in the fourth quarter on steepening yield curve and decent earnings (read: A Look Back At S&P 500 Sector ETFs in 2019).
Oil price was on a topsy-turvy ride sliding to bear territory in August from peaking in April. However, oil price recorded the highest yearly gains in three years with U.S. crude rallying 34.5% and Brent jumping 22.7% buoyed by Middle East tensions, dwindling inventories and fresh OPEC output cuts. The volatility in oil price kept away investors from the energy ETFs (read: Top-Performing Energy ETFs & Stocks of 2019).
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Vanguard S&P 500 ETF (VOO): ETF Research Reports
Energy Select Sector SPDR Fund (XLE): ETF Research Reports
Financial Select Sector SPDR Fund (XLF): ETF Research Reports
Vanguard Total Bond Market ETF (BND): ETF Research Reports
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares MSCI EAFE ETF (EFA): ETF Research Reports
iShares Core U.S. Aggregate Bond ETF (AGG): ETF Research Reports
iShares U.S. Treasury Bond ETF (GOVT): ETF Research Reports
iShares Edge MSCI Min Vol USA ETF (USMV): ETF Research Reports
iShares Core MSCI EAFE ETF (IEFA): ETF Research Reports
iShares MBS ETF (MBB): ETF Research Reports
Vanguard Total International Bond ETF (BNDX): ETF Research Reports
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