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December 19, 2017

Cash inflow in biggest US ETF signals calm among retail investors

Cash inflow in biggest US ETF signals calm among retail investors

Cash inflow in biggest US ETF November

Recently unqualified investors have been heavily taking long positions on US stocks with unprecedented rush, reported Ameritrade brokerhouse, which has a client base of 6M traders.

The dynamics of biggest ETF fund in the US – ETF SPY, which mirrors movement of S&P 500 index shows that the cash outflow turned to abrupt cash inflow signaling growing calm among investors. From the start of 2017 to 20 of November the outflow amounted to 14.3B dollars, but a month later investors poured back 16.8B dollars, pulling the fund’s size curve into positive area. A similar trend occurred during the peak of «Trumpenomics» euphoria in March which then gave place to market anxiety and expectations of stock market retracement.

ETF SPY is considered the safest bet on US stock market for unqualified investors which don’t want to bother with particular securities. The fund suits investment needs of unprofessional investors rather than the market experts. The rise of the ETF indicates soothed concerns of private sector over recession risk and buoyant outlook related to tax-cut reform.

Oil outlook

Oil prices have a solid reason for extending growth and its the spread between Brent and Urals.

The discount between North Sea Brent and Russian Urals has shrunk to the lowest level since 2014 year. At the Friday close the spread between the two grades was just 15 cents. The previous record of 21 cent was in August of this year. Recall that last time this happened, the oil price gained $10 or almost 19%.

Why narrowing spreads may be a bullish sign for the price? Its because for oil grades, such as Brent and WTI, besides of real supply and demand factors we should also consider speculative games which can move price to opposite directions despite fundamental forces. But non-producing bets in trading Urals are considerably fewer, that’s why the price of the grade is much more elastic to the fundamental changes of supply and demand.

The history shows that the spread between Russian oil and UK traded Brent could be another sign of the rising bullish pressure in the oil market. Though its not a clear-cut indicator this may be supportive for those who is considering adding long positions on oil to their portfolio.

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