Dow Jones Forecast:
- The Dow Jones[1] and S&P 500[2] sit near the top of their August ranges but ETF flows highlight the indecision amongst traders
- Despite back-and-forth flows for the SPY ETF, corporate debt via JNK and HYG has registered notable inflows – an indication of returning risk appetite or complacency
- As uncertainty lingers, learn about stock market volatility and how to trade it[3]
Dow Jones Forecast: Deadlocked Fund Flows Highlight Trading Range
The three major US equity indices have etched out a tight trading range in August as persistent uncertainty looks to threaten both bears and bulls alike. Friday trading has seen the Dow Jones approach the upper bound of its range, helping to solidify a solid week of gains for the Industrial Average. Nevertheless, capital flows in and out of various exchange traded funds highlight the deadlock between bulls and bears. Thus, the conviction and confidence behind the Dow’s nearly 3% gain for the week may not be as convincing as it appears on the surface.
Data source: Bloomberg
For the week, the SPY, IVV and VOO ETFs - which closely track the S&P 500 – notched approximately $1 billion in inflows, bringing the monthly total to a net outflow of nearly -$5 billion. Excluding the initial drop and tracking from August 5 to August 30 when the S&P 500 was rangebound, the flows are just $270 million – a drop in the bucket for the funds with nearly $550 billion in cumulative assets under management. Although the broad market fund flows are less than encouraging for bulls, a moderate uptick in demand for HYG and JNK suggests some investors are willing to accept greater risk or complacently stretching for yield.
Data source: Bloomberg
The two funds that
