With the stock market in free fall, exchange-traded fund investors are running for the exits.
Investors pulled $1 billion from the SPDR Dow Jones Industrial Average ETF Trust, ticker DIA, last week — the second largest outflow this year and the most in nine months. That was as the Dow fell 6.9 per cent, marking its worst week in a decade.
“Investor sentiment for this index has weakened amid the latest market volatility,” said Todd Rosenbluth, director of ETF research at CFRA Research. “Sentiment toward US equities is down sharply heading into 2019 amid concerns about rising interest rates and the political challenges.”
The Dow fell as much as 2 per cent on Monday, extending losses to the lowest level since September 2017 as concerns out of Washington kept markets on edge. Last week, equities spiralled after the Federal Reserve raised rates for the fourth time this year and central bank Chairman Jerome Powell failed to quell worries in the press conference. Individual company news also weighed.
Walgreens Boots Alliance Inc posted weaker-than-expected earnings last week and announced a new cost-cutting plan that raised concerns about how the company is going to grow. Analysts at Bank of America Merrill Lynch also downgraded American Express last week, saying market swings could be signaling weaker growth expectations and concerns that US consumer credit costs could increase.
Last Friday also capped the rough week as a “quadruple witching” day. According to Dave Lutz, managing director of JonesTrading, that could have affected the outflows, or it could just be the “market imploding,” he said. Investors are feeling uncertain in todays market, he said.