Hello! This week\u2019s ETF Wrap digs into where investors put their money in October, and how November is shaping up in markets after the Federal Reserve\u2019s decision on interest rates. <\/p>\n
Please send feedback and tips to christine.idzelis@marketwatch.com or isabel.wang@marketwatch.com. You can also follow me on X at\u00a0@cidzelis<\/a>\u00a0and find me on\u00a0LinkedIn. Isabel Wang is at\u00a0@Isabelxwang<\/a>.<\/p>\n Sign up\u00a0<\/strong>here<\/strong>\u00a0for our weekly ETF Wrap.<\/strong><\/p>\n Ultra-short-term bonds were all the rage again in October, as investors in exchange-traded funds broadly favored fixed income over equities in a tough month for both asset classes.<\/p>\n Investors poured $13 billion into ultra-short-term government bond ETFs last month, the most popular category among U.S.-listed exchange-traded funds that target fixed income, said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, by phone. Investors had also favored short-duration funds in September and August, State Street found.<\/p>\n \u201cIt\u2019s basically a yield and stability play,\u201d said Bartolini. \u201cRates volatility is still extremely high.\u201d<\/p>\n The bond market has been volatile this year amid a surge in Treasury yields, with steep losses in long-duration government debt in particular. Short-term bond ETFs have held up better, with ultrashort duration Treasury bills attracting investors with yields of more than 5%.<\/p>\n Ultra-short-term government bond funds provide \u201cstable income\u201d while \u201cyour volatility is basically close to zero,\u201d said Bartolini.<\/p>\n In October, the SPDR Bloomberg 1-3 Month T-bill ETF Long-term government bond ETFs trailed with a total $5.5 billion of inflows last month, while intermediate-term funds attracted $2.9 billion, a State Street report written by Bartolini shows.<\/p>\n Short-term government bond ETFs this year have seen \u201ca massive increase of usage\u201d relative to their total assets under management, he told MarketWatch.<\/p>\n Ultrashort and short-term government funds, which in October saw their third-best month for inflows ever, have driven 35% of overall flows into bond ETFs so far this year despite comprising just 15% of total assets under management for fixed-income-focused exchange-traded funds, according to State Street.\u00a0<\/p>\n October was an unusual month for ETFs in that investors contributed more to fixed income than equities, according to Bartolini.\u00a0<\/p>\n Last month\u2019s flows indicate a \u201crisk-off attitude,\u201d he said.<\/p>\n Bond ETFs attracted around $18.7 billion in October, compared with almost $16.3 billion for equity-focused exchange-traded funds, the State Street report shows.\u00a0<\/p>\n Read:<\/strong> Bond ETFs see \u2018crescendo\u2019 of investor demand after yield surge in volatile fixed-income market, says Invesco\u2019s Paglia<\/p>\n Also see:<\/strong> Millennials seem to dig bond ETFs despite volatile fixed-income market, Charles Schwab finds<\/p>\n \u201cInvestors are really coming out of equities,\u201d said Tim Urbanowicz, head of research and investment strategy at Innovator ETFs, in a phone interview. And \u201cthey\u2019re scared to get longer out on duration in bonds,\u201d he said. So, \u201cthey\u2019re all piling into cash or the shorter-end of the yield curve,\u201d where rates are \u201cvery attractive.\u201d<\/p>\n According to State Street, equity flows were \u201cmuted\u201d in October, with only U.S. stock ETFs seeing \u201cmeaningful flows while the rest of the regions had combined net outflows.\u201d<\/p>\n Meanwhile, the SPDR Bloomberg 1-3 Month T-bill ETF, which has $39 billion of assets under management and invests in ultra-short-term Treasurys, has returned a total 4% this year through Wednesday, FactSet data show.<\/p>\n By contrast, long-term bonds have been hammered by the Federal Reserve\u2019s rate-hiking cycle, which it began in early 2022 in an effort to tame high inflation in the U.S.<\/p>\n The iShares 20+ Year Treasury Bond ETF The Fed announced on Wednesday that it\u2019s holding its benchmark interest rate steady, at a target range of 5.25% to 5.5%, and maintaining what Fed Chair Jerome Powell described as a \u201crestrictive\u201d monetary policy as the central bank continues its effort to bring down inflation.\u00a0<\/p>\n Markets \u201ccheered\u201d the Fed\u2019s \u201cno-hike decision and comments from Chair Powell at his press conference as signs that the Fed has moved to the sidelines,\u201d said Nicholas Colas, co-founder of DataTrek Research, in a note emailed Thursday.<\/p>\n \u201cHowever, the word of the day was \u2018persistence,\u2019 as in \u2018financial conditions need to remain persistently tight\u2019 for the Fed to stay out of the game,\u201d said Colas, referring to Powell\u2019s remarks.<\/p>\n \u201cThat means they want to see long term rates stay high and equities to remain near current levels,\u201d wrote Colas. \u201cHow much this caps any year-end rally is an open question.\u201d<\/p>\n The U.S. stock market slumped in October, but has continued to rally in the wake of Powell\u2019s comments on Wednesday. The SPDR S&P 500 ETF Trust Shares of the iShares Core U.S. Aggregate Bond ETF As usual, here\u2019s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.<\/p>\n
\n BIL
\n captured more than half the assets flowing into ETFs that hold ultrashort and short-term government bonds, with the single fund garnering $7.6 billion, according to Bartolini.\u00a0<\/p>\nBond ETF inflows surpass flows into equities<\/h4>\n
\n TLT
\n has lost 12.1% this year through Wednesday on a total return basis. The ETF, which has $40 billion of assets under management, is on track for a third straight year of losses, FactSet data show.<\/p>\nMarkets cheered, but\u2026<\/strong><\/h4>\n
\n SPY,<\/span>
\n which slid 2.2% last month, was up a sharp 1.9% on Thursday afternoon, bringing its year-to-date gains to more than 12%.<\/p>\n
\n AGG
\n were up 0.6% on Thursday afternoon, but the fund was down around 0.9% for the year on a total return basis. The ETF, which has $89 billion of assets under management, lost a total 1.6% in October, FactSet data show.<\/p>\nThe good\u2026<\/h2>\n
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\n \n Top Performers<\/strong><\/p>\n<\/td>\n \n %Performance<\/strong><\/p>\n<\/td>\n<\/tr>\n \n \n SPDR S&P Homebuilders ETF
\n XHB\n <\/td>\n\n 5.5<\/p>\n<\/td>\n<\/tr>\n \n \n iShares U.S. Home Construction ETF
\n ITB\n <\/td>\n\n 5.4<\/p>\n<\/td>\n<\/tr>\n \n \n iShares Mortgage Real Estate ETF
\n REM\n <\/td>\n\n 5.2<\/p>\n<\/td>\n<\/tr>\n \n \n Global X Uranium ETF
\n URA\n <\/td>\n\n 4.9<\/p>\n<\/td>\n<\/tr>\n \n \n iShares MSCI Saudi Arabia ETF
\n KSA\n <\/td>\n\n 4.8<\/p>\n<\/td>\n<\/tr>\n \n \n Source: FactSet data through Wednesday, Nov. 1. Start date Oct. 26. Excludes ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater<\/p>\n<\/td>\n \n <\/td>\n<\/tr>\n<\/table>\n \u2026and the bad<\/h2>\n
\n
\n \n Bottom Performers<\/strong><\/p>\n<\/td>\n \n %Performance<\/strong><\/p>\n<\/td>\n<\/tr>\n \n \n First Trust Nasdaq Clean Edge Green Energy Index Fund
\n QCLN\n <\/td>\n\n -5.9<\/p>\n<\/td>\n<\/tr>\n \n \n Invesco Solar ETF
\n TAN\n <\/td>\n\n -3.6<\/p>\n<\/td>\n<\/tr>\n \n \n iShares Global Clean Energy ETF
\n ICLN\n <\/td>\n\n -3.3<\/p>\n<\/td>\n<\/tr>\n \n \n SPDR S&P North American Natural Resources ETF
\n NANR\n <\/td>\n\n -3.0<\/p>\n<\/td>\n<\/tr>\n \n \n United States Oil Fund LP
\n USO\n <\/td>\n\n -2.8<\/p>\n<\/td>\n<\/tr>\n \n \n Source: FactSet data<\/p>\n<\/td>\n \n <\/td>\n<\/tr>\n<\/table>\n New ETFs<\/h2>\n
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Weekly ETF reads<\/h2>\n<\/p><\/div>\n