ETF Expert

It’s easier to tell where markets have been than to tell where they’re going. Similarly, it’s simpler to identify where institutional and individual investor money has been flowing than to identify where it will flow to in the future.

Nevertheless, EPFR Global is a world leader in tracking fund flow and asset allocation data. And last week, some fund types experienced their largest inflows of 2009.

According to EPFR Global, global equity funds fared rather well, raking in $1.74 billion. Commodity funds also picked up a cool $1 billion in new assets. Meanwhile, money market funds experienced inordinately large outflows.

Most noticeably, $2.16 billion went into global bonds, with roughly one-quarter of those dollars streaming into emerging market bonds. What’s more, global bond funds have seen inflows every week since the week of 4/6/09-4/10/09.

It appears that investor willingness to invest in something… anything… may have kicked in about one month after developed world markets bottomed in early March. If some comfort had been established one month after the party officially started, will risk aversion via fund outflows occur one month after a stock pullback begins? And if so, will foreign bonds and emerging bonds be hindered or helped in the process?

While U.S. Treasury bonds are likely beneficiaries of a stock market correction, foreign bond ETFs and emerging bond ETFs may be less fortunate. That’s because equity risk aversion may be accompanied by a strengthening of the U.S. dollar. If that’s the case, foreign bonds could be adversely affected by currency risk.

That said, the U.S. stock market and foreign bonds have a longer-term history as non-correlating assets; foreign bond ETFs and emerging market bond ETFs can still zig, even if stocks zag.

In addition, it is still probable that shorter-term U.S. dollar gains will eventually give way to longer-term weakening. And that’s going to help foreign bond ETFs and emerging market bond ETFs.

Year-to-date, here’s how some of the ”majors” stack up:

If you’d like to learn more about ETF investing… then tune into ”In the Money With Gary Gordon.” You can listen to the show “LIVE”, via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

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