Investors Pumped $13B Into ETFs After Fed Meeting

Financial assets surged across the board following a surprisingly dovish conclusion to the Federal Reserve’s two-day meeting last week. 

Fed officials signaled that rates are done going up and that they may cut them by 75 basis points next year. 

In the full trading day following the Fed's meeting, investors pumped $13 billion into U.S.-listed ETFs, according to data from Bloomberg.  
 
That includes $2.7 billion into the SPDR S&P 500 ETF Trust (SPY) and $2 billion into the Vanguard S&P 500 ETF (VOO). On Thursday, the S&P 500 closed at about 4,720, a mere 1.6% below its record high from two years ago. 

The Invesco S&P 500 Equal Weight ETF (RSP) and the iShares Russell 2000 ETF (IWM) were also in demand, with daily inflows of more than $1 billion each. Many investors expect the stock market rally to broaden now that interest rates are headed lower. 

Up until recently, a handful of mega-cap tech stocks were responsible for the bulk of the stock market’s gain for the year.  

RSP and IWM jumped 3.5% and 6.2%, respectively, between Wednesday and Thursday, much better than the 1.7% return for the S&P 500.  

Fixed-Income ETF Inflows  

Though the majority of the buying in ETFs was focused on stocks, investors still added a decent chunk of change to fixed-income ETFs on Thursday.  

Some $3 billion went into fixed-income ETFs collectively, including $1.3 billion into the iShares 20+ Year Treasury Bond ETF (TLT). 

The yield on the 30-year Treasury bond neared 4% this week, down significantly from the 16-year high of 5.1% reached in October. 

Junk bond ETFs like the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), the Xtrackers USD High Yield BB-B ex Financials ETF (BHYB) and the SPDR Bloomberg High Yield Bond ETF (JNK) were also popular, with daily inflows of between $300 million and $450 million.