ETF Flow Report

October 2022 Flow Report

Commentary from the Desk:

In October 2022: 1/ Central Banks Fight Against Inflation, 2/ The UK U-turn, and 3/ Equity Rose, Fixed Income Flattish and 4/ The Strong Dollar and Currency-Hedged ETFs.

1/ Central Banks Fight Against Inflation. ECB rose its rate by 75bps. The central bank signaled it’s making progress in its fight against inflation. The likelihood of a recession increases. The Ger 10Y-2Y spread declined by 14.3bps 19.93bps. In the last week of September, it got closer to 0 for the 1st time since March 2019. Officials also toughened the terms on more than €2 trillion TLTROs. The Fed also rose its rates by 75bps in early November and would be supposed to pause when the Fed funds rate reach 5%.

2/ The UK U-turn. The UK government retreated from plans for big tax cuts. Prime Minister Liz Truss asked Kwasi Kwarteng to step aside as Chancellor of the Exchequer. Jeremy Hunt was confirmed as his replacement. Liz Truss resigned and Rishi Sunak was appointed as Prime Minister. The UK 30Y-5Y spread retraced all the loss by gaining +54bps to -3.8bps from -58bps at the end of September.

3/ Equity Rose, Fixed Income Flattish. The MSCI All Country World was back in positive territory for the 1st time since July. It rose by 5.96% in October compared to a 9.74% decline in September. The Bloomberg Global-Aggregate of the sovereign debt and IG, as measured by the LEGATRUU, declined by 70bps vs -5.14% in September. The sentiment improved on corporate debts with the CDS on the EUR IG and HY debt down by 21bps to 113.83 and 85bps to 554.8bps.

4/ The Strong Dollar and Currency-Hedged ETFs. we’ve seen demand for currency-hedged ETF with underlying in US dollar. The currency hedge protects against an appreciation of the currency of the ETF against the USD. In October, The DXY slightly declined by 53bps to 111.527.

October Performance highlights

Equity Indices: FTSE100: 2.91%, NASDAQ: 3.96%, MSCI WORLD: +7.11%, SPX: +7.99% SXXP: 6.28%, SX5E: 9.02%,
Bonds: GER 10Y: +8bps, US 10Y: +22bps, GER 2Y: +18bps, US 2Y: +20bps
Commodities: Gold: -1.63%, Oil: +7.81%, Natural Gas: -6.07%
FX: DXY: -53bps, USDJPY: +2.74%

From a regional perspective, US and European equities were sold while International equities were bought. On the fixed income side, US and EU governments bonds were in favour.

More specifically:

On equity indices: The S&P500, NASDAQ, MSCI USA CLIMATE CHANGE, MSCI EMU ESG and FTSE100 were sold. The STOXX EUROPE 50 and the EURO STOXX DAILY SHORT recorded a mixed activity. The MSCI WORLD was bought
In fixed income: US TREASURIES on the 1-3Y, 3-7Y, 7-10Y and 20Y+ were bought. The German 0-1Y and the BLOOMBERG BARCLAYS EUROAGG were bought.

Sources: Bloomberg RFQE, Tradeweb, DRW - Oct 2022

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