ETF’s Just Crossed a Major Threshold

ETF Inflow

For the first time ever, mom and pop investors have crossed a threshold in how they are putting their money to work.  Over the last 12 months, the group, through registered investment advisor’s and other retail brokers have put more money into Exchange Traded Funds than Mutual Funds.

ETF’s maybe fairly new to the market, as most are less than 10 years old, but they are grabbing more and more funds from their older more established cousin than ever before.  This trend is sure to accelerate in the coming years as more and more investors get savvy to the high fees charged in Mutual Funds.

As you can see from the chart above, inflows v outflows have been going in opposite directions for years now.  Its not just lower fees that are making them more popular, it’s their liquidity, their intraday trading ability and some tax advantages that has smart investors jumping ship from Mutual Funds.

Mutual Funds still dwarf the ETF size of the pie overall due to institutional money still having a preference for them, but it’s only a matter of time before they catch up and overtake in my humble opinion.

As for the market action today, it did not surprise me to see the push up this morning fail to break out to new highs. Given the massive bounce back on Friday, some profit taking was bound to come.  However, I have not changed my opinion that a new all time high this week is in order.  The odds seem higher than a break below 2070 in the ES S&P 500 Futures.  But it’s still a choppy mess, so hold onto your hats!

Market News:

U.S. stocks closed higher on Monday, following positive momentum from Europe, as investors looked to Federal Reserve speeches and economic data for signals on the timing of a rate hike.

The S&P 500 ended higher but failed to hold above its closing high of 2,117.69, with financials the greatest advancer. Led by JPMorgan Chase, the Dow Jones industrial average traded about 50 points higher after briefly adding 100 points. The blue chip index held above 18,000, about one percent away from its closing high.

Ahead of Friday’s important jobs report for the month of April, factory orders for March showed a gain of 2.1 percent, the biggest increase in eight months and above expectations of a 1.9 percent increase. However, the underlying trend remained weak against the backdrop of a strong dollar.

The first of several central bank policymakers to speak this week, Chicago Fed’s Charles Evans said that hiking interest rates does not seem appropriate until next year due to the weak first quarter. His address came at the annual meeting of the Columbus Economic Development Board.

At a separate event on job creation, San Francisco Fed President, John Williams, said some Americans were left behind in the U.S. economic recovery, which treated some better than others.

Asian and European shares closed higher on Monday, although U.K. and Japanese stock markets were closed for local holidays. Markets were boosted after tepid manufacturing data from China raised hopes that Beijing would unveil further stimulus measures to boost the economy.


Earnings: Disney, News Corp., Electronic Arts, Groupon, Mylan Labs, Archer Daniels Midland, Estee Lauder, Discovery Communications, Kellogg, NobleEnergy, TRW Automotive, Vulcan Materials, Devon Energy, LendingClub, PioneerNatural Resources, Plains All American, Allstate, HCA, DirecTV, UBS, Herbalife, Zuliliy, Weight Watchers, Newfield Exploration, SolarCity

8:30 a.m.: International trade

9:45 a.m.: Services PMI

10:00 a.m.: ISM nonmanufacturing

8:00 p.m.: Minneapolis Fed President Narayana Kocherlakota