Flow & Tell with iShares | October 2024 ETF Flows

October saw a sharp increase in yields and a dramatic bond selloff, with 10-year Treasury yields climbing 55bps since the September Federal Reserve meeting.¹ The increase follows stronger-than-expected data pulling 3Q GDP to a robust 2.8%, above the Atlanta Fed’s GDPNow forecast at the start of the month.²

Fixed income ETF investors turned to active solutions to navigate the rapidly evolving rate backdrop. October marked the largest month of inflows ever into the exposure, with active fixed income ETFs adding $4.1bn, nearly double the YTD monthly average.³

October partially unwound overweight tech allocations: nearly $2.5bn came out of tech funds in the past two weeks, the second biggest two-week outflow in the past 18 months.⁴ Investors reducing tech bets did not translate to outflows in tech-adjacent pockets. Consumer discretionary ETFs saw dramatic inflows, adding their biggest weekly flow in three years, following Tesla’s 3Q earnings results. Notably, the two sessions after Tesla’s report saw more inflows than all third-quarter flows combined.

Positioning reflects recent price action — in the last two weeks of the month, tech gave up earlier gains to sink into negative territory while consumer discretionary led to the upside. The real estate sector also outperformed the S&P 500, and flows followed, with real estate funds having clocked net inflows every week since the end of May.

October marked a notable divergence from 2024 trends in international fund flows, exacerbated by disappointment from China’s policy updates. At the end of September and beginning of October, single country China ETFs garnered investor attention when the Chinese government enacted surprise stimulus to buoy economic activity. While the supportive policies boosted short-term performance, the lack of meaningful follow through by the government led to Chinese equities losing ~4% in October.⁵ Flows in Chinese single-country ETFs have followed performance and shed $10bn from October 12th to 26th, a fourth of the inflows that followed the initial surprise policy shift.

Outflows from China focused-ETFs intensified the broad outflows from single-country allocations, which were occurring for the first time this year. From mid-April to the start of October, single country funds notched $134bn in inflows.⁶ Over the past two weeks, however, China outflows have contributed to $16bn in outflows from single country allocations.⁷