Fund Flows: Russell 1000 ETFs Lose, VOO & IWM Win

Investor fund flows over the past week have revealed a telling shift in sentiment: While broad-market Russell 1000 ETFs saw the largest outflows, inflows were directed toward the S&P 500 and small-cap stocks.  

The two biggest losers were the iShares Russell 1000 Value ETF (IWD) and the iShares Russell 1000 Growth ETF (IWF), which together represent a wide swath of large-cap U.S. equities across both styles.  

Meanwhile, the Vanguard S&P 500 ETF (VOO) and iShares Russell 2000 ETF (IWM) took in the largest inflows of the week.  

This rotation suggests that equity investors may be repositioning away from broad, diversified large-cap exposure and moving toward more selective allocations—favoring mega-cap tech stocks driving the S&P 500 and smaller companies potentially poised to benefit from easing trade tensions.

The timing of these flows coincides with this week’s pause in U.S.-China tariffs, a de-escalation in the trade war that has weighed heavily on market sentiment throughout 2025. Investors appear to be making a tactical shift: narrowing their large-cap exposure to the tech-heavy S&P 500 while also turning to small-caps, which could rebound more quickly in a post-tariff environment.

Russell 1000 ETFs Lead Weekly Outflows

VOO, IWM Lead ETF Weekly Inflows

Weekly flows as of May 15, 2025—Data from FactSet, retrieved from etf.com Pulse Tool.

Russell 1000 vs. S&P 500, Russell 2000

The Russell 1000 ETFs, including IWD (value) and IWF (growth), track nearly the entire universe of large-cap U.S. stocks—comprising over 90% of total U.S. market capitalization. They offer a diversified approach across sectors, but this breadth also means they include a large number of companies more sensitive to economic slowdowns and market-wide volatility, particularly from tariffs or inflation.

In contrast, VOO tracks the S&P 500, a large but more concentrated group of large-cap stocks with a strong tilt toward mega-cap technology names like Apple Inc. (AAPL), Microsoft Corp. (MFST) and Nvidia Corp. (NVDA). These firms have proven more resilient and have become the market's primary growth engine in recent years.

IWM, which tracks the Russell 2000 Index, offers exposure to small-cap U.S. stocks. Small-caps tend to benefit earlier in economic rebounds, as they are more responsive to changing macro conditions like falling interest rates or easing trade pressures.

Flows Suggest Market Sentiment Shift

The stark contrast in flows between the Russell 1000 ETFs (IWD, IWF) and VOO and IWM signals an important rotation. Investors may be reducing their exposure to broader market risks while doubling down on tech-driven growth and domestically oriented small-cap stocks, which could thrive if the trade war truly fades.

This shift also suggests that investors see more upside in concentrated strategies rather than broader indexes weighed down by sectors that might struggle in a slower economy—such as cyclicals, industrials or financials. VOO’s tech concentration could offer growth in a relatively defensive way, while IWM could capitalize on improving sentiment and easing economic headwinds at home.

VOO and IWM’s Performance Dependent on De-Escalation

Should the U.S.-China trade war continue to de-escalate, small-cap stocks may gain momentum from reduced supply chain disruptions and improved business sentiment. At the same time, the S&P 500 could continue to benefit from strong performance in its largest components, especially as investors seek quality and innovation in uncertain times.

Overall, the past week's fund flows indicate a market that's becoming more selective amid volatility, favoring high-conviction growth and domestic recovery themes over broad diversification. Whether this proves to be a temporary rotation or the beginning of a longer-term trend will depend on further developments in trade policy, inflation and Fed signals in the months ahead.