Trump causes nearly $100bn windfall for stock exchange-traded funds

A record $97.6 billion flooded into exchange-traded funds for U.S. stocks between Nov. 8 and Dec. 15, TrimTabs Investment Research said Monday.

That postelection inflow amounts to more than 6 percent of assets and is 1 ½ times the $61.5 billion inflow for all of 2015, according to the firm.

“The stampede into U.S. equity ETFs since the election has been nothing short of breathtaking,” David Santschi, chief executive officer at TrimTabs, said in a release.

U.S. stocks surged to record highs after President-elect Donald Trump won the Nov. 8 election on the hope his promised tax cuts, infrastructure spending and deregulation would boost growth. The S&P 500 is up more than 5.5 percent since Election Day.

So far in December, $43.4 billion has flowed into U.S. equity ETFs, putting the month on pace to beat November’s record inflow of $50.7 billion, according to TrimTabs.

The Trump rally is not boosting active funds. U.S. equity-focused mutual funds have lost $24.9 billion in December and are on track for their 22nd consecutive month of outlfows, the report said. The enthusiasm for Trump is not enough to overcome the secular decline in active funds’ assets due to poor performance and high fees.

To be sure, the powerful extreme flows does raise the eyebrows of contrarians.

“One has to wonder, who’s left to buy?” asks Santshi.

Extreme ETF flows tend to indicate stocks will soon move in the opposite direction, TrimTabs speculates, as does declining short interest, or bets that share prices will decline, over the longer term. Short interest at New York Stock Exchange member firms fell 3.6 percent in late November to its lowest since February 2015, the report said.

Santschi adds, “The market also could get a nasty jolt in January, when investors who’ve been postponing stock sales this year in anticipation of lower tax rates next year start to sell.”

Source: CNBC