Gauging investor sentiment is a difficult task, particularly in an uncertain market environment. However, ETF fund flows can be a useful barometer in assessing sentiment and understanding investor behavior at a given point in time. In July 2023, the following five funds garnered the most net fund flows:
Against the backdrop of the strong performance exhibited by the emerging market equities asset class for the month, the iShares ESG Aware MSCI Emerging Markets Index ETF (Ticker: XSEM) gathered the most flows for the month. Though the performance of US Equities and EAFE Equities still lead year to date, increasing fund flows toward emerging market equities could be viewed as investors looking to can gain some diversification exposure going forward.
As interest rates continue to climb higher, the desire for yield-focused solutions is becoming further entrenched among investors, as the BMO (TSX:BMO) Ultra-Short-Term Bond ETF (Ticker: ZST) and CI First Asset High Interest Savings ETF (Ticker: CSAV) garnered the second and fourth most flows, respectively. Regarding the High Yield asset class, investors are warming to the riskiest US corporate debt, resulting in the BMO High Yield US Corporate Bond Index ETF (Ticker: ZJK) having the fifth most flows for the month. With confidence about the state of the US economy increasing, the yield spreads between the top and bottom rungs of the junk bond market continue to narrow.
The Horizons S&P/TSX 60 Index ETF (Ticker: HXT) garnered the third most flows for the month. With the resurgence of the equity market following 2022’s downturn, having broad exposure to equity markets has proven to be beneficial thus far in 2023. For investors desiring to have exposure to the large-cap segment of the Canadian equities market, this solution will fulfill said objective.
July 2023 Performance Leaders
While monthly fund performance does provide a point in time look at how an investment strategy has fared in the moment, when taken into context with the prevailing economic environment, investors are able to understand the basis for its current results and assess how future macroeconomic developments will influence the strategy’s ongoing performance. In July 2023, the following five funds exhibited the highest performance:
As observed from the list of ETFs provided, all the stated Horizon ETFs are leverage strategy solutions. These solutions seek a return, before fees and expenses, of +200% or – 200% of its Referenced Index for a SINGLE DAY; longer periods AND/OR greater volatility will make the possible divergence more pronounced.
Crude oil prices have increased since June, primarily because of extended voluntary cuts to Saudi Arabia’s crude oil production and increasing global demand. As a result, these factors will continue to reduce global oil inventories and put upward pressure on oil prices in the coming months, with the Brent price averaging $86/b in the second half of 2023. Both the Horizons BetaPro Crude Oil Leveraged Daily Bull ETF (Ticker: HOU) and Horizons BetaPro S&P/TSX Capped Energy 2x Daily Bull ETF (Ticker: HEU) reflect these macroeconomic changes in an amplified manner due to them being leveraged solutions; hence their respective returns for the month of July 2023.
As anticipation builds around whether the Securities and Exchange Commission will allow spot Bitcoin exchange traded funds, there has been a speculative led rally in cryptocurrencies. The CI Galaxy Blockchain ETF (Ticker: CBCX) replicates the performance of the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity Hedged to CAD Dollars Index, which holds companies engaged in the development of blockchain technologies, as well as businesses operating and developing the blockchain ecosystem. Many of these companies facilitate crypto mining or their related activities, which is correlated to the prices of the assets mined. Simply put, the higher Bitcoin prices go, the more benefits CBCX holdings accrue.
Silver’s characteristic price volatility has been at play in 2023. Though decisions made this year by the US Federal Reserve have led to price sensitivity of precious metals, the industrial use cases for silver have also been reflected in its pricing. Silver has benefited from the uptake of solar panel technology, investment in renewable energies, the rise of electric vehicles and ongoing 5G cellular service upgrades around the world. The Horizons BetaPro Silver 2x Daily Bull ETF (Ticker: HZU) reflects these ongoing developments in an amplified manner, given the use of leverage within the strategy.
Efforts to reintroduce the Secure and Fair Enforcement (SAFE) Banking Act to the US House and Senate influenced marijuana-focused companies for the month. The act is designed to prohibit federal regulators from punishing financial institutions for the sole reason that they choose to provide such services to cannabis companies, their owners, and their employees. This news of bipartisan lawmakers supporting this act stoked hopes for more relief in the cannabis industry, which the Horizons BetaPro Marijuana Companies 2x Daily Bull ETF (Ticker: HMJU) provides leveraged exposure to.
Under current federal law, banks and credit unions face federal prosecution and penalties if they provide services to legal cannabis businesses because cannabis is still a Schedule I substance. Schedule I substances are defined as drugs with no currently accepted medical use and a high potential for abuse, according to the Federal Drug Enforcement Administration. Without access to financial services, state-legal cannabis businesses are forced to operate their businesses solely using cash.
This content was originally published by our partners at the Canadian ETF Marketplace.