What goes down, must go up — and in the next year, no less. At least, that’s a belief that would justify this year’s standing as the second-best year on record for inflows into stock-focused exchange traded funds.
Even as equities endured their worst performance since the 2008 financial crisis with a one-fifth fall for US blue-chips, investors have poured some $510bn into equity ETFs, according to Bank of America data. The biggest flows have been directed at the giant index trackers and the passive funds that invest in large-cap stocks which have borne the brunt of this year’s losses.
The bulls have a point since stocks on average gain 20 per cent in the 12 months after hitting a bear market bottom, according to broker LPL Financial. LPL adds that, at nearly one year old, the current bear market is now longer than the average since the second world war of 11 months. There are also only four occasions that the S&P 500 has suffered back-to-back calendar-year losses in a history stretching back almost a century.