ETFs: Rising interest rates in the USA scare off investors
Selling sentiment is gripping almost all asset classes after the US Federal Reserve raised interest rates again as announced. ETF investors are focusing on the old economy and sustainability in equities, and on government bonds.
10 May 2022. Frankfurt (Börse Frankfurt). The Federal Reserve's tighter monetary policy is fuelling investor concerns that the economy will be further impacted. China's zero-covid policy, inflation, supply shortages and the ongoing war in Ukraine are also perceived as existing drags. Bond yields on ten-year US Treasuries climbed to over 3 per cent, the same level as in 2018.
Market situation: Interest rate hikes and the consequences weigh on the market
Despite the weak environment, Frank Mohr of Société Générale reports that ETF investors bought significantly more than they sold last week, although buying interest waned towards the weekend. "Uncertainty is a big factor," Mohr reports on the mood of private investors. Nevertheless, the good news is that the savings plans will continue to be implemented. "We don't see any changes here."
"Buy the dip - there is no panic here, setbacks are currently being bought." - is how Fabian Wörndl of Lang & Schwarz describes the behaviour of his clients.
"Although the Fed's communication was much less dramatic than feared, the Dow has lost almost 2000 points - without a break, without a stop," says Jan Duisberg of ICF Bank, describing the market reactions. That is worrying, he says. "Prices have been falling for a good four months and five weeks in a row - a stabilisation is not yet in sight." The question is: where and when will the markets catch up? "This movement should be treated with respect, further markdowns cannot be ruled out."
Mohr
Equity ETFs: Global trackers dominate - sales of emerging markets
In Société Générale's ETF trading, purchases on global equity trackers stand out, accounting for 41 per cent of the turnover in Société Générale's equity ETFs. "The global products are clearly dominant," explains Mohr. The buy side is strong in the MSCI World, where the Lyxor MSCI World (FR0010315770) is at the top of the buy lists and, in its sustainable variant, the AMUNDI
INDEX MSCI WORLD SRI (<LU2249056297>) is in strong demand. US equity trackers follow with 20 per cent of turnover in the space.
In keeping with the dividend season, the Vanguard FTSE All-World High Dividend Yield (<E00BK5BR626>) is being added to portfolios.
"We are seeing top sales with Nasdaq products," reports Wörndl. Leveraged products such as the WISDOMTREE NASDAQ 100 3X DAILY SHORT ETC (IE00BLRPRJ20) and its long counterpart, the WisdomTree NASDAQ 100 3x Daily Leveraged (IE00BLRPRL42), are in the spotlight, often during the day. Both would be bought and sold depending on market conditions. Leveraged Nasdaq products have also been bought and sold on Duisberg's books, most notably the Invesco EQQQ Nasdaq 100 (IE0032077012).
Investors who are betting on falling markets are also buying short products on the DAX, explains Wörndl, primarily the Xtrackers ShortDAX x2 Daily Swap (LU0411075020). On the other hand, equity trackers on the emerging markets are sold. This is reflected in the outflows in Amundi MSCI Emerging Markets (LU1681045370). Duisberg, on the other hand, noted higher turnover than usual in the HSBC MSCI Pacific ex Japan (<DE000A1C22P6>).
The increased volatility was also met with high demand. Lang & Schwarz investors bet on the Lyxor S&P 500 VIX Futures Enhanced Roll (LU0832435464). At Société Générale, the iShares Edge MSCI World Minimum Volatility (IE00B8FHGS14) dominates. Duisberg reports buying to start the week in the Deka STOXX Europe Strong Style Composite 40 (DE000ETFL052).
Sectors: Technology sold - Old Economy in demand
Apart from high interest in index trackers, the experts report individual sector bets. The sell-off in technology stocks is echoed in ETF trading. "It is no surprise that we are seeing more selling here with the slide in tech stocks," explains Mohr. 24 per cent of the sector's volume is in this sector. He saw the strongest selling in a sector heavyweight, L&G Cyber Security (IE00BYPLS672), but also in the iShares Digitalisation ETF. (IE00BYZK4883).
In contrast, the old economy is in demand: Mohr's clients mainly bought resources with the iShares STOXX Europe 600 Basic Resources (DE000A0F5UK5), mining with the VanEck Global Mining (IE00BDFBTQ78) and energy with the iShares S&P 500 Energy Sector (IE00B42NKQ00). A perennial favourite, he says, is sustainability. At Mohr, the iShares Global Clean Energy (IE00B1XNHC34) is accordingly high on the buy lists.
Commodities: Gas speculation
At Lang & Schwarz, the initially high demand for ETCs with industrial metals is ebbing.
After purchases in the past few days, the WISDOMTREE INDUSTRIAL METALS ETC (<DE000A0KRKG7>) is now being sold again.
With the record high of 9 US dollars for natural gas, driven by expectations of gas embargoes in the midst of the Ukraine war, investors at Lang & Schwarz are speculating primarily on leverage: Wörndl reports enormous demand for the WisdomTree Natural Gas 3x Daily Leveraged ETC (<IE00BLRPRG98>).
Cryptos: Sales at the beginning of the week - Baskets in demand
Wörndl is seeing plenty of demand in the crypto book, although the sell side has had the upper hand since the start of the week. With price losses across all major cryptocurrencies, the 21Shares Bitcoin ETP (CH0454664001) and the 21Shares Terra ETP (<CH1145931015>) are being sold. Here, a recent price slide of 44 per cent is spooking crypto investors. Duisberg also sees cryptocurrencies punished at the start of the week, but his books nevertheless show buying and selling, especially in basket solutions such as the VanEck Crypto Leaders ETN (DE000A3GWEU3) and the 21Shares Crypto Basket Index ETP (CH0445689208).
Duisberg
Fixed income: government bonds preferred to corporate bonds
The experts do not see any major swings in one direction or the other in the fixed income business. Mohr reports purchases in the Amundi Floating Rate USD Corporate ESG (LU1681040900) as well as purchases and subsequent sales of Italian government securities (IE00B7LW6Y90). Wörndl generally registers more trading in the segment. He reports purchases of European government securities and mentions the Amundi ETF Government Bond Lowest Rated EuroMTS Investment Grade (LU1681046857) as an example. On the other hand, inflation products are sold, such as the Xtrackers Global Inflation-Linked Bond UCITS ETF 1C EUR hedged (LU0290357929). In principle, government rather than corporate securities are bought. Mohr explains that they might be considered safer.
| Equities | |
| World | Buys |
| USA | Buys |
| Europe | Sells |
| Branches | |
| Technology | Buys+Sells |
| Sustainability | Buys |
| Basic Materials | Buys |
| Bonds | |
| european Tresuary bonds | Buys |
from: Antje Erhard 10 May 2022, © Deutsche Börse AG
About the author
Antje Erhard is a journalist and moderator specialising in the stock market, business and finance.
Feedback and questions to redaktion@deutsche-boerse.com.
Erhard
Deutsche Börse 
