Research summary
Rising markets and inflows lift ETF assets to a record high
June 04, 2024
In our latest ETF Perspectives report:
Q1 inflows hold strong, rates are likely to stay higher for longer, and robust job growth fuels continued stock market gains.
Vanguard ETF Perspectives is our in-depth quarterly commentary on the latest ETF trends and insights. In each report, our investment experts help investors address issues that may affect their portfolios.
Key takeaways
ETF industry assets continue a record climb
ETF industry assets rose 8.79% in the first quarter to $8.87 trillion as inflows of $195 billion were boosted by $522 billion worth of market appreciation. The inflows and market gains came amid shifting perceptions of when the Federal Reserve might start easing credit costs.
ETF returns dampened by uncertainty about inflation
The persistence of risk-on sentiment in equity markets was fueled by economic data showing continued growth and a steady labor market. Upward blips in consumer-inflation readings for February and March gave pause, but those two data points remain for now just that—two data points. The market seems to be indicating that it will remain focused on each inflation report until a new trend is clearly discernible.
Return on bond yields creates potential optimism
The renewed sense that rates may remain higher for longer has influenced fixed income allocation decisions, and active strategies are garnering an increasing share of the inflows. Q1 flows into fixed income ETFs totaled $49.9 billion, with new flows concentrating on the intermediate part of the yield curve. Those flows were almost 28% lower than the $69.1 billion in flows during 2023’s fourth quarter.
Cash allocations continue to grow
U.S. investors now hold about $6.0 trillion in money market funds, $1.1 trillion of which materialized in the last 18 months. That figure is relatively high historically and may be reflecting persistent anxiety in financial markets.
ETF Perspectives: Q1 2024
Related links:
- Exchanges play a vital role in driving ETF liquidity (article, issued May 2024)
- Fund industry’s asset mix offers encouraging sign (article, issued April 2024)
- The five factors that make up total ETF costs (article, issued March 2024)
Notes:
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Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
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Contributors
Samuel Martinez, CFA
Cassandre Juste
David Sharp
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