Lyxor ETF Money Monitor: In September, European ETFs recorded their best month ever, having gathered €17.3bn vs. the €8.4bn of outflows we saw in August…
By Marlène Hassine Konqui, Head of ETF Research and Kristo Durbaku, ETF Research Analyst
The inflows were driven by equity ETFs, which also enjoyed their best month ever (+€11.1bn).
Flows into fixed income (€4.3bn) and commodities ETFs (€382m) rebounded slightly.
Smart beta flows slowed from where they were in August but remained positive at €204m.
Meanwhile, ESG ETFs keep breaking records.
Inflows of €1.2bn took their total for the year to €9.7bn.
Signs of some support for developed market flows?
So which areas of the equity market were responsible for this latest monthly record?
Perhaps unsurprisingly, the US led the way, but Europe wasn’t too far behind (+€3.9bn and +€3.2bn respectively) despite all the doom-mongering.
Both categories enjoyed a strong rebound and contributed strongly to the new net flows record for the developed market equity category (+€8.9bn).
Both the Fed and the ECB announced interest rate cuts last month as they struggled to stimulate their economies.
This easing seems to have helped European equity markets and ETF flows recover some ground after massive outflows of €17.2bn over the previous ten months, but it’s too early to tell whether this rebound will be short-lived or is the start of something more durable.
For this more positive sentiment to endure, we suspect it may take some more fiscal activism as stated by the soon-to-be-departing Mario Draghi.
Monetary policy may have reached the limits of its effectiveness.
In the US, the Fed’s policy of pre-emptive interest rate cuts and a resilient services sector should continue to shore up superior growth and have a positive impact on flows, even if trade war news flow triggers the odd wobble.