Not sure if it was just me, but April seemed to fly by! Tax season kept us all busy and markets have been doing well overall even with a slight pull-back in the leaders during April. Speaking of the leaders, I wanted to take this month’s update to provide some insight into fund flows in the market, and that they don’t always go where you’d expect.
April Market Performance:
- S&P500: 1.46%
- NASDAQ: 0.04%
- DOW: 2.4%
- TSX: 2.66%
April Portfolio Performance:
- Harness Oculus Conservative: 0.95%
- Harness Oculus Balanced: 1.17%
- Harness Oculus Growth: 1.29%
Year-to-date the NASDAQ (the technology driven index) has been at the top of the leader board with a YTD return of 16.7% as of end of April, which has been a good run, but it is vital to remember what a short period that is… The NASDAQ 1-Year return as of end of April is -0.8%, and it’s 2-Year return is -12.37%…
Yet even with the recent run in return, Canadian investors don’t seem to be too impressed… The top 3 YTD Equity ETF Fund Flows in Canada are:
- BMO MSCI EAFE Index ETF = $1.1B
- NBI Global Real Assets Income ETF = $790.9M
- iShares ESG Aware MSCI Emerging Markets Index ETF = $467.7M
It seems Canadian investors are much more interested in International Markets and Emerging Markets…
Looking at it from a shorter time frame, over the last month, Canadian ETF Equity flows have continued the march into Emerging Markets and EAFE exposure. The top 3 1-Month Equity ETF Fund Flows in Canada are:
- iShares ESG Aware MSCI Emergin Markets Index ETF = $345.8M
- BMO MSCI EAFE Index ETF = $311M
- Hamilton Canadian Bank Equal Weight Index ETF = $241M
Also notable is that even with all the fear surrounding the banking sector recently, over the last month, the third highest ETF in terms of money-in was into the Hamilton Equal Weight Banking ETF which invests in Canada’s big 6 banks.
I’m certainly not trying to bash tech companies. I am a proponent of complete portfolio diversification, and having some exposure to tech names is prudent for portfolio diversification. But what is vital to draw from the above charts is that money doesn’t always follow the leader.
The headlines may be touting how well tech is doing, but investors aren’t buying more of it. This can potentially indicate that even with recent surprisingly good earnings out of the tech sector, investor appetite for high-growth and high valuations is slipping due to the effect high interest rates have had on tech companies. While moving into previously beaten up international and emerging market exposure is looking like a cheaper buy with potential further upside. It is with this rational that we recently increased the international and pacific exposure in our Harness Oculus Balanced and Growth Portfolios as a long-term investment opportunity.
Remember, diversification of your portfolio is key, and what the headlines are telling you might not be the whole story.
