ETF Flow Report

November 2022 Flow Report

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November 2022 Flow Report

Commentary from the Desk:

1/ Inflation Focus and the Moderated Fed, 2/ Chinese Equities and the Easing of the Quarantine, 3/ Equity and Fixed Income Rose and 4/ The Dollar Decline and the Gold Rise.

1/Inflation Focus and the Moderated Fed. Fed officials stressed the need to keep raising despite a better than expected US CPI reading. That would mean raising interest rates to 5%- 5.25%. Powell announced that the Fed may be ready to moderate the pace of rate increases as soon as the December FOMC meeting. The Fed wants to avoid to overtighten because cutting rates is not something that is going to happen soon. Further change to the yield curve happened in November with the US 3M yielding 73bps more than the 10Y and with the US 10Y-1M spread declining to -77bps. The Bloomberg Global Agg 10Y-2Y spread inverted for the first time since 2000.

2/Chinese Equities Benefited from the Easing of the Quarantine. As Beijing has relaxed its Zero Covid Policy, Chinese equities rose. In November, the MSCI China Index, as measured by the MXCN, increased by 28.86%. This rise partly explained the underperformance of US Consumer Staples relative to Consumer Discretionary.

3/Equity and Fixed Income Up. November is the first month of 2022 where all country exposure in the equity space were in positive terriority. The SPX, NASDAQ, STOXX 600, MSCI CHINA and MSCI EMERGING rose by 5.38%, 5.48%, 6.75%, 28.86% and 14.64% resp. In Fixed Income, the global aggregate barometer of government and credit debt – as measured by the LEGATRUU – turned positive for the first time since July by adding 4.7%.

4/The Dollar Decline and the Gold Rise. The US dollar against a basket of major currencies – as measured by the DXY – declined by 5% to 105.95. The precious metal - strongly correlated to the greenback – rose by 8.26% to $1786.52 an ounce.

November Performance Highlights

  • Equity Indices: SPX: +5.38%, NASDAQ: 5.48%, MSCI EUROPE: 6.74%, MSCI WORLD: +6.80%, SX5E: 9.60%, MXEF: 14.64%, MXCN: 28.86%
  • Bonds: GER 10Y: -21bps, US 10Y: -44bps, GER 2Y: +19bps, US 2Y: -17bps
  • Commodities: Gold: +8.26%, Oil: -6.91%, Natural Gas: +9.05%
  • FX: DXY: -5.00%, USDJPY: -7.15%

From a regional perspective, German and Japan equities were bought while International, US and European equities were sold. On the fixed income side, strong appetite for US government bonds.

More specifically:

  • On equity indices: The S&P500, MSCI WORLD, MSCI USA CLIMATE CHANGE recorded a mixed activity. NASDAQ, MSCI EUROPE and MSCI SWITZERLAND were sold. The MSCI JAPAN ESG ENHANCED and the STOXX EUROPE 50 were in favour.
  • In fixed income: US TREASURIES on the 1-3Y, 3-7Y, 7-10Y and 20Y+ were bought. The German 0-1Y was sold.
Sources: Bloomberg RFQE, Tradeweb, DRW - Nov 2022

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