Investors Dip Their Toes in Emerging Markets
April ETF flow data suggest that investors' risk appetites might be returning.
The ETF industry enjoyed another month of net cash inflows in April. With the stock market rally from the early March lows continuing to gain steam, ETFs gathered about $9.5 billion in net new inflows for the month (leveraged ETFs accounted for about 27% of total industry inflows). While the S&P 500 Index has rallied an impressive 34% since hitting the current cycle lows on March 9, we'd caution investors not to get caught up in blind optimism. It does appear that there are some "green shoots" in the economy (to borrow the phrase popularized by Fed chairman Ben Bernanke in a recent 60 Minutes interview), however, there are still plenty of factors--namely rising unemployment and a debt-laden U.S. consumer--that suggest some prudence is warranted.
The bulls and bears are likely to continue duking it out in the debate over whether the market's strong performance over the past several weeks is a bear-market rally or the emergence of a new bull market. (Note: We've already technically satisfied the definition of a bull market, which would be a 20%-plus appreciation of the major market indexes). Whichever side of the debate you're on, it can sometimes be helpful to track fund flows to see where other investors are putting money to work, or which investments others are selling en masse.
John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.