Markets
Where Investors Put Their Money in 2018
Where Investors Put Their Money in 2018
For most investors, 2018 was both an eventful and frustrating year.
Between the looming threat of trade wars and growing geopolitical uncertainty, the market also skipped a beat. Volatility took center stage, and the S&P 500 finished in negative territory for the first time in 10 years.
Although many asset classes finished in negative territory, a look at fund flows – essentially where investors put their money – helps paint a more intricate picture of the year for investors.
Visualizing 2018 Fund Flows
Today’s infographic comes to us from New York Life Investments, and it visualizes the flows in and out of U.S. funds for 2018.
It not only shows when investors poured money into mutual funds or ETFs, but it also breaks down these funds by various categorizations. For example, when did people buy funds that held U.S. equities, and when did they buy funds that primarily held money market securities?
Let’s dive into the data, to take a deeper look.
Mutual Funds vs. ETFs
For another year in a row, ETFs gained ground on mutual funds:
Type of Fund | 2018 Fund Flows | Total Assets (End of Year) |
---|---|---|
ETFs | +$238.4 billion | $3.4 trillion (17.2%) |
Mutual Funds | -$91.3 billion | $16.3 trillion (82.8%) |
However, despite growing for another year, ETFs still make up a smaller part of the overall fund universe.
Flows by Asset Class Group
Every fund gets classified by Morningstar based on the types of assets it holds.
For example, a fund that focuses on holding fast-growing, large tech companies in the U.S. would be classified broadly as “U.S. Equity”, and more specifically as “U.S. Equity – Large Growth”.
Here’s how flows went, within these broader groups:
Fund Category Group | Total Assets ($mm) | Growth in 2018 |
---|---|---|
Allocation | $ 1,171,166 | -5.9% |
Alternative | $ 203,343 | -5.7% |
Commodities | $ 88,939 | 2.4% |
International Equity | $ 2,787,400 | 3.1% |
Money Market | $ 2,879,510 | 6.2% |
Municipal Bonds | $ 795,132 | 0.9% |
Sector Equity | $ 816,149 | -3.7% |
Taxable Bonds | $ 3,747,268 | 3.5% |
U.S. Equity | $ 7,173,902 | 0.0% |
Investors pulled money from Allocation, Alternative, and Sector Equity funds, while rotating into Money Market and Taxable Bonds categories. These latter assets are considered safer, and this shift is not surprising considering the market volatility towards the end of the year.
Also interesting here is that U.S. Equity – the biggest category overall by total assets – saw equal amounts of inflows and outflows, ending with a 0.0% change on the year.
U.S. Equity: A Closer Look
U.S. Equity ended the year with zero change, but it’s also the biggest and broadest category.
Let’s break it down further – first, we’ll look at what happened to flows by market capitalization (small, mid, and large cap stocks):
Market Capitalization | Assets | Growth (2018) |
---|---|---|
Large Caps | $5.6 trillion | 0.2% |
Mid Caps | $884 billion | -2.5% |
Small Caps | $672 billion | 1.7% |
Investment in funds that held large cap stocks increased by 0.2%, while the money allocated to small caps rose by 1.7% over 2018. Interestingly, investors pulled money out of mid caps (-2.5%).
Now, let’s look at U.S. Equity by type of strategy:
Fund Strategy | Assets | Growth (2018) |
---|---|---|
Growth | $2.0 trillion | -2.1% |
Value | $1.4 trillion | -2.8% |
Blend | $3.8 trillion | 2.2% |
According to these flows, investors pulled money from funds focused solely on value or growth, while instead preferring funds that were a blend of the two strategies.
International Equities
Finally, let’s see the types of international funds that investors bought and sold over 2018.
Region | Growth (2018) |
---|---|
China | 35.5% |
Diversified Emerging Markets | 4.9% |
Latin America | 4.3% |
Foreign/World | 3.9% |
Diversified Asia/Pacific | -5.6% |
Pacific/Asia ex-Japan | -7.1% |
Japan | -9.0% |
India | -11.3% |
Europe | -23.4% |
Investors eschewed funds that had a primary focus on European, Indian, and Japanese markets, while piling into funds that held Chinese equities. Meanwhile, Latin America and emerging markets also got some love from investors.
Conclusion
While 2018 was an eventful year for markets, this recap shows that investors are adjusting their portfolios accordingly.
Where will investors put their money in 2019?
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
---|---|---|
EURO STOXX 50 | 14.9 | 2.2 |
STOXX Europe 600 | 14.4 | 2 |
U.S. | 25.9 | 4.7 |
Canada | 16.1 | 1.8 |
Japan | 15.4 | 1.6 |
Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
---|---|---|---|---|---|---|
EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
Canada | 1.00 | 0.22 | 0.40 | |||
Japan | 1.00 | 0.88 | ||||
Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
Index | Description | Market Cap |
---|---|---|
STOXX Europe 600 | Pan-regional, broad market | €10.5T |
STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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