Cash flows in the ETF sector through January suggest that the post-US election sell-off of risk assets was “a bit overblown”, according to State Street Global Advisors.
Speaking at a media briefing, State Street Global Advisors head of ETF research and strategy Asia-Pacific for SPDR ETFS, Matthew Arnold, said that while certain segments of the market had benefited in the immediate wake of Mr Trump’s election victory, others had suffered.
“When he was elected, although the consensus was that the markets would go to hell in a handbasket initially, after a sort of five-hour sell off, there was a very strong recovery in the market, so we saw significant rallies in US financial stocks, US small cap stocks, US industrials,” he said.
“Segments that didn’t perform quite so well were gold and emerging markets – both on the equity side and on fixed income side – and so we had some outflows after Trump in those areas.”
In January, however, both gold and emerging markets saw money flow back in, which Mr Arnold said was possibly a “recognition that the sell-off post-Trump was a bit overblown”.
Mr Arnold said investors needed to be mindful that Mr Trump and his administration had not yet provided clarity on several policy settings.
“We’ve got to remind ourselves as well that we’ve got a lot of tweets from President Trump, we know the direction of travel he would like to take with the policy, but as of yet he’s fairly short on details,” he said.
The rotation of money back in to sectors that underperformed after Mr Trump’s initial victory may be a reflection that investors are beginning to take this consideration on board, Mr Arnold said.
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