In the ETF market, a trend reversal is emerging in May, says Fidelity International. “After European investors heavily sold off ETFs on the US for three consecutive months, this trend has temporarily stopped.
“Although inflows last month were still well below the 12-month average, they were positive for the first time on a three-month view. ETFs focused on Europe saw less strong growth than recently.”
“Relaxing signals in the trade dispute between China and the USA impacted the ETF market in May. Investors turned more towards the USA again,” says Stefan Kuhn, Head of ETF Distribution Europe at Fidelity International. Conversely, the tariff dispute between the USA and the EU is intensifying again. “It is quite conceivable that Trump’s renewed tariff threats against the EU are already affecting net inflows into European equity ETFs.” Additionally, the markets in Europe have performed very well this year. “Investors are asking themselves how much upside potential European stocks still have.” Whether the ETF market remains influenced by macro-political developments is a key question for the coming months.
Overall, the ETF market grew by USD30 billion in May, stronger than in the previous month. This mainly reflects the returning investor confidence in the US market, Fidelity writes.
In the shadow of the stock markets, bond ETFs were able to gain in May as well. Both bond ETFs focused on Europe and the USA exceeded their three-month average. The reasons for the upward movement are varied: “Fundamentally, the markets are still in risk-off mode, which is favourable for bonds. Flows are moving away from high yield towards shorter-term bonds as a cash substitute.” Additionally, the ECB’s interest rate policy plays a role. “The market still expects at least two ECB rate cuts this year. Fundamentally, falling interest rates are positive for bonds and thus also for bond ETFs,” concludes Stefan Kuhn.
