Supported by the expectation of the Federal Reserve's interest rate cut next year, US stocks hit new highs last week. This has led to a surge in capital inflows for US stock funds, with the world's largest ETF (Exchange Traded Fund) - SPDR S& The daily inflow of funds into the P 500 ETF has set a new historical record.
SPDR S& managed by State Street Bank with assets of $478 billion; The P 500 ETF (stock code SPY) had an inflow of $20.8 billion last Friday, the largest daily inflow since its establishment in 1993. According to data analysis firm BI, this inflow scale is also the largest among all ETFs in the world.
According to data compiled by Bloomberg, this ETF received a cumulative inflow of over $24 billion last week, also setting a historical record.
Matt Bartolini, head of Americas research at SPDR, a global investment advisory firm, said that SPY has received a large influx of funds, coinciding with several events that are bound to increase trading activity.
Last Friday was the last trading day before the adjustment of constituent stocks in the S&P 500 and NASDAQ 100 indices took effect, which could prompt trillion dollar funds tracking these two indices to readjust their investment portfolios. At the same time, there were also options worth approximately $5 trillion expiring on the same day, and Wall Street managers usually settle existing positions or start new ones.
"The cash flow we saw on Friday was 100% natural flow from customers, investors, and traders," Bartolini said over the phone. "This also reflects the Santa Claus trend we have seen in the past few days - so momentum trading has also entered SPY funds."
Momentum trading is a strategy of buying and selling financial assets by analyzing the strength of recent price trends. Momentum traders seek to exploit the trend of stock prices rising or falling. When various technical indicators suggest that stocks are entering a strong upward trend, traders will buy stocks.
Portfolio adjustment
At the same time, the trading volume of SPY funds on Thursday and Friday last week was much higher than the average level of the past month. Jingshun Nasdaq 100 Trust 1 (stock code QQ), which tracks the NASDAQ 100 index, experienced a $5.2 billion outflow of funds last Friday, the highest daily outflow since 2000.
"Large index companies may be rebalancing their investment portfolios," said Dave Lutz, head of Jones Trading ETF
Todd Sohn, ETF strategist at Strategas, attributes the outflow of funds to investors taking profits after a sharp rise in the stock market this year.
Driven by the rise of large technology stocks, the Nasdaq 100 index has risen by a cumulative 53% so far this year.
Sohn said that weighted ETFs such as Jingshun S&P 500 attracted $2.1 billion in gold last week, indicating that investors; Quota; We are seeking to further reduce our risk exposure to the seven heavyweight stocks starting in 2024; Quota;.
Sohn refers to the seven largest technology companies in the index, namely Apple, Microsoft, Alphabet (parent company of Google), Amazon, Meta (parent company of Facebook), Nvidia, and Tesla.