00:00I just want to start with this macro backdrop and sort of what you're seeing when it comes
00:05to flows in different ETFs right now and how that's reflecting this environment.
00:10Yeah, absolutely. Great to be back. You know, we've seen a little bit of a shift since the
00:15start of the year. I think coming into this year, the story was all about this pro-cyclical rotation
00:20and maybe a rotation from the U.S. into the rest of the world. In terms of where we're seeing
00:24flows
00:24right now, though, we are seeing investors take down cash and we're seeing a strong intent to do
00:29that in both flows and polling data that we have. And they're adding to U.S. equities. So it's a
00:34little bit more of the playbook that we saw from the last couple of years rather than a stark shift.
00:39They're adding to U.S. equities. They're adding to tech. And that aligns with sort of where we see
00:44some of the best opportunities, some of the best earnings growth as we're really in the middle of
00:48earnings season right now as well. Where are they taking money out?
00:53Yeah. So, you know, again, we're seeing a real pulldown in terms of cash. I think
00:57investors and particularly the financial advisor community had built up more cash reserves earlier
01:02this year. There was some hesitation around allocating over March because of some of the
01:07geopolitical conflict. But the biggest subtractions are we seeing are from cash in the portfolio.
01:13Biggest additions are really big swing back into U.S. equities. So we're seeing flows be a little bit
01:19more balanced between value and growth. And we're seeing investors really reach for more of that AI
01:25exposure, even though at the beginning of the year, they may be working more concerned about
01:29valuations and concentrations. So seeing, yeah, targeted there.
01:33Well, is the cash that's being pulled, is it coming from money market funds? Is it and is it going
01:38into, I know you said it's going to certain equity funds, but is some of it going into any bond
01:43funds
01:43right now? Because and the reason I ask is because we've been trying to figure out where all the cash,
01:47the trillions of dollars in cash that's on the sidelines in money market funds ends up going and
01:51when.
01:52Yeah. And we've been talking about that for a while, right? There was a lot of dry powder on
01:56the sidelines. There were record highs almost every month in terms of the money market flows.
02:00So yes, we've seen some money come out of there. We've seen a rebalance though,
02:05in terms of the flows we've seen into the ETF market. So March was very strong into fixed income.
02:10That's cooled actually quite a bit in favor of equities so far in April. Within fixed income,
02:17it was strong allocations into short dated funds. But now again, we're seeing more risk appetite.
02:22I think, you know, one set of flows really sort of proves the point in terms of how focused investors
02:26are right now. We're on track for the largest ever month of flows into semiconductor ETFs and one of the
02:32largest outflow months for equal weighted ETFs in about 20 years. So investors are reaching for tech
02:38with both hands. Something like BAI, which is our BlackRock AI ETF, really proving the point there
02:43as well.
02:44How much momentum picked up as we saw? Obviously, we saw a market pullback at the start of the war.
02:51How much of the activity happened in the last week or two? Is it like, you know, we talked a
02:56lot
02:56about short covering in general for pushing a lot of share prices higher, but I'm just curious,
03:02has it been steady over the last month? Has it picked up in the last couple of weeks?
03:07Yeah, it's picked up in the last couple of weeks. So we've tended to see investor sentiment,
03:11again, sort of citing some of the polling data that we have from our very large and broad investor
03:16base. We saw sentiment bottom around the third week of March. And so at that time, we had seen
03:22really strong flows into fixed income funds, especially short dated funds there. And then
03:26it's rebounded very sharply in line with market performance. So we are, you know, we're seeing
03:31investors, you know, see better entry points and lower valuations to some of the themes that they
03:36want to hold for the long term. So I think that the valuation reset that obviously happened, you
03:41know, we saw prices come down, even while earnings were still being revised higher. So, you know,
03:46we're, you know, about 40% of the S&P 500 is going to report earnings this week. Expectations are
03:52really strong coming into earnings season. It's the highest in five years. We're expecting about 14% or
03:5715% growth year over year. So I think investors are really following the fundamentals and the
04:03fundamentals are pointing to a strong U.S. relative rest of the world and strong growth and strong
04:10tech. And so, you know, I think that those are some of the themes that we've really highlighted in
04:14our spring outlook as well. Strong U.S. relative to the rest of the world, but what are you seeing
04:19outside of the U.S. in terms of flows and where do you think the opportunities are? Yeah, we have
04:24a
04:24preference right now for emerging markets, overdeveloped markets. You know, I think a lot
04:29of the preference for the U.S. really stems from, you know, we came into the conflict in the Middle
04:33East from more of a position of strength in terms of macro data. The U.S.'s position as a net
04:39oil
04:39exporter or energy exporter obviously helps. So I think it's on a relative basis we see the U.S.
04:45holding up better. But emerging markets have really captured investor attention as sort of the next leg of
04:50this AI theme. So if you want exposure to AI, which is, you know, grow in companies that are growing
04:55earnings phenomenally quickly, you know, it's not just a U.S. story anymore. So we see investors looking
05:00for more diversification even within something like the AI theme, which they're adding more to in their portfolios.
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