ETF activity shifts as market digests new political landscape

Statistics from Tradeweb show ETF investing patterns have now shifted following the US presidential election.

Investing patterns of ETF’s which saw a surge in activity following the US presidential election, have reversed as the market begins to process the new political landscape.

Trading statistics from Tradeweb between November 2016 and January this year revealed US equity ETFs have slowed down to a ‘buy’ ratio of 53%, after a high of 62% in December 2016.

Notional volume executed on Tradeweb’s European listed ETF marketplace surged following Donald Trump’s election, with equity activity accounting for 58% of the overall European ETF platform flow and ‘buys’ narrowly beating ‘sells’.

Tradeweb said North American equities was by far the most heavily-traded sector with nearly €2.5 billion in notional, of which 59% was ‘buys’.

An analysis showed this investing pattern has now reversed, with North American equity ETFs slowing to a ‘buy’ ratio of 53%.

Earlier this month, The Autorité des marchés financiers in France authored a report warning investors that ETF liquidity remains a risk despite the recent boom in activity.

 “An ETF’s liquidity is ultimately tied to that of its underlying securities and relies heavily on the key role played by the authorised participant.

“A major event affecting most or all of its underlying market segment can lead to trading halts on both the secondary and primary markets,” the report said.

The AMF warned if investors’ interest in ETFs is supported by low interest rates, “heightened vigilance” is required due to the potential excessive influence of passive management.

Tradeweb’s analysis of ETF activity explained Institutional investors are increasingly relying on exchange-traded funds to gain access to a broad range of asset classes and investment objectives.

“In times of heightened market volatility, as in the weeks surrounding the recent US presidential election, ETFs can offer investors diversification of economic, currency and risk exposure,” Tradeweb said. 

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