ETF Investors Bet Big as S&P 500 Erases 15% Decline
- Investors stayed in broad equity funds as markets tumbled after a brief dip into bear market territory.
- Bogle and Buffett investing strategies were reflected in market behavior, as many investors chose to stay the course.
- While the market has rebounded, uncertainty lingers about the impact of the trade war.
It was among the fastest bear-to-bull markets in history—and ETF investors appear to have largely bet that the dip wouldn’t last.
The market turnaround, in which a 15% decline was erased, was the fastest since 1982, according to an X post from research firm Bespoke Investment Group.
VOO Stands Tall
From April 7 through May 12, as the S&P 500 surged from a brief bear market into bull mode, investors poured $20.4 billion into the $643.4 billion Vanguard S&P 500 ETF (VOO), according to FactSet data.
Barely a month ago, on April 10, VOO’s assets under management were $536.2 billion, and it’s $107.2 billion, or 20%, gain since then reflects a mix of flows and a jump in the index.
Investors put $66 billion into ETFs over roughly the same period, April 2 through May 6, a recent note from Bloomberg Intelligence ETF Analyst Athanasios Psarofagis said. For equity ETFs alone, they put in $22.3 billion over the bear-to-bull period, according to data from Morningstar Direct.
Of course, many investors sold their equity ETFs and chose the safety of gold and fixed income as President Donald Trump launched a trade war the likes of which investors have never seen in their lifetimes. Amid fears of a global economic collapse, the SPDR Gold Trust (GLD) pulled in $7 billion over the past three months as the precious metal hit record high prices.
And not all equity ETFs fared as well as VOO in terms of flows: The No. 3 ETF, the iShares Core S&P 500 ETF (IVV), shed a net $23.5 billion of investor cash, and the tech heavy Invesco QQQ Trust (QQQ) had net outflows of $1.6 billion.
The second-largest ETF, the SPDR S&P 500 ETF Trust (SPY), added $4.4 billion.
Stay the Course
Investors seem to have largely followed the wisdom of John Bogle and Warren Buffett, who understood that more money is made while investors sleep than when they are awake and fiddling with their portfolios.
“A lot of retail kept buying the dip. I think it’s a hard habit to break cause it keeps working,” Psarofagis wrote in an email. “I think it’s really hard to get a U.S. investor to ditch U.S. stocks like Apple, etc., and trade those in for European names.”
The S&P 500 is little-changed year to date and remains 2.4% below its level when Trump was inaugurated on January 20. Experts further caution that the full impact of the trade war is not reflected in economic activity and that the outlook remains murky.
Still, buy-and-hold and buy-the-dip investors probably already know what they will do with their money over the next few months.
