The Markets July 29, 2010

Fixed Income ETFs Continue Growth

Exchange traded fund (ETF) industry assets in the U.S. decreased 0.4% during the first half of 2010, as investors held $772 billion in 897 ETFs as of June 30, 2010, according to State Street Global Advisors (SSgA).
Reported by

The growth of fixed income ETF assets, which increased 78% in 2009, remained a key trend during the first half of the year. A press release said fixed-income ETF assets increased by $21.2 billion or 21% in the six months to June 30, 2010, as the number of bond ETFs available to investors reached 105. State Street said in 2006, just six fixed income ETFs existed, representing approximately $20 billion in assets. In the first half of 2010, six of the 10 ETFs with the highest net cash flows were bond ETFs.   

The growth in bond ETFs was broad based — every category, from corporate bonds to municipal bonds to Treasury Inflation Protected Securities (TIPs) and U.S. Treasuries, saw positive cash flows year to date. The most popular fixed-income asset classes included short-term bond and U.S. Treasury ETFs, which attracted more than $7 billion and $5 billion in net cash flows, respectively.  

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Amid concerns about the European debt crisis and the pace of economic recovery in the U.S., investors continued their search for non-correlated returns, as assets in gold ETFs increased by 30.2% during the first half of the year. SPDR Gold Shares (GLD) currently leads all exchange traded funds in net cash flows, attracting more than $7.6 billion during the first half of the year, as GLD’s total assets surpassed $50 billion in the second quarter, according to the press release.  

Flash Crash  

With ETFs accounting for more than 60% of all cancelled trades during a market disruption that occurred between 2:40 p.m. and 3:00 p.m. on May 6, 2010, several third parties questioned their role in the market turmoil, State Street said. Preliminary findings, which are consistent with internal reviews, indicate that the events of May 6 were the result of market structural issues, including the lack of published, uniform standards on erroneous trades, market circuit breakers and speed bumps, and were not caused or exacerbated by ETFs or ETF trading.   

Investor confidence in ETFs in the weeks that followed the “flash crash” remained strong, as net new inflows into ETFs totaled $20.2 billion in May and June.
Data & Research July 29, 2010

Women More Optimistic about Financial Future

A new nationwide survey issued by Citi shows there is a widening divide between men’s and women’s outlook for the economy and their own financial situations.
Reported by

Sixty-two percent of men are somewhat (47%) or very (15%) optimistic that their own financial situation will get better over the next twelve months, a four point decline since March. While the percentage of women who are somewhat (47%) or very (19%) optimistic remains unchanged since March, the percentage of women who are very optimistic has risen four points.   

According to a press release, women’s top priority for saving, across all age groups and income levels, is to have money for emergencies and unexpected needs (27%). Twenty-five percent of women under 40 prioritized saving for education while 23% of women over 40 prioritized saving for retirement.   

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Reducing debt was an issue across all ages with 15% of women under 40, and 13% of women over 40 responding it is a priority. Only 2% of women under 40 and 3% of women over 40 said they are saving to invest in financial markets;, however, nearly one in five women (17%) expressed interest in learning more about saving for retirement and in making investments (15%).   

The survey found that young women (ages 18 to 39) are more upbeat about their personal financial situations and in their outlook for the future. Nearly twice as many young women (aged 18 to 39) say they are better off now than they were a year ago (23%) than women over 40 (12%). More than four in five (82%) young women are optimistic that their own financial situation will improve, whereas 59% of women over 40 feel the same.   

The announcement said that while current assessments of local economic conditions have improved slightly since March, up 3 points for men (24%) and 4 points for women (23%), only 50% of men believe that the business conditions where they live will get somewhat (46%) or much (4%) better in the next 12 months, compared with 51% and 5% of women, respectively. For men this represents an eight-point decline from three months ago, but it’s just a three-point decline for women.  

Sixty-five percent of women and 60% of men believe we still have a ways to go before the economy hits bottom. Only 30% of women and 35% of men believe we have already hit bottom.   

Sixty-three percent of women and 61% of men believe it will be at least two or three years, if not longer, before the economy stabilizes for their household. This includes nearly a third (31%) of women and a full quarter of men (25%) who believe it will take four or more years before the economy stabilizes for their household.  

Hart Research Associates conducted the telephone survey of 2,005 adults, including 1,070 women, nationally from June 22-29, 2010.

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