Investors are returning to dollar-cost averaging into ETF products after experiencing panic selling at the end of 2017. As a heavy sell-off occurred in Q2, and an aggressive redemption wave took place, capital is now streaming back into ETFs through new issuances.
Market Exodus in Q2: Causes and Consequences
The Wolf Of All Streets notes that ETFs experienced considerable outflows in the second quarter, with investors turning cautious in the face of difficult market conditions. It would have been mistaken to expect the kind of balanced flows that characterized the quarters prior to Q2; back then, inflows and outflows were evenly matched, a sign of stability in trading.
In fact, the heavy ETF selling that began at the start of the second quarter was seen as a telling change in the market’s mood. As capital exited, it was a clear indication of the uncertainty and pessimism taking hold, putting pressure on the performance of these products and driving up volatility.
Signs of Recovery: Capital Returns to ETFs
The Wolf Of All Streets has observed a distinct turnaround in the trend recently. ETF investors are returning and fresh inflows are picking up steam, a welcome change from the risk aversion seen not long ago. This can be read as a sign that confidence is being restored with the market’s stabilization.
Such a move may well mark the start of a new chapter for the market after what the second quarter brought. Yet even as optimism takes hold, it is worth remembering how difficult it was for ETF products then; investor sentiment can turn quickly when the market sends out its signals.
Source — The Wolf Of All Streets: https://www.youtube.com/watch?v=LixIF89sGoU