ETF Snapshot: Normal services resumed, but with possibility of disruptions

Key takeaways
June saw US$23.9bn in net new assets (NNA), with flows more evenly distributed between risk assets and defensive positions. Core US equity ETFs saw renewed demand, while fixed income ETFs experienced their strongest inflows since July 2024.
Positive flows into gold and silver ETCs suggest investors are hedging against rising economic and geopolitical uncertainties. The Quality factor can also help investors stay defensive.
Thematic equity ETFs ranked second in inflows, led by defence-themed ETFs with demand driven by increased spending commitments from NATO members. Read more in our latest ETF Snapshot.
Recapping June ETF flow trends
June’s flow data showed a strong pick-up in demand for core US equity exposures, as the S&P 500 and Nasdaq-100 indices both tromped to new record highs when the month drew to a close. That may be reminiscent of the trend seen for so much of last year, when mega-caps were driving equity markets, concentration was at multi-decade highs, and investors weren’t being sufficiently rewarded for taking risks outside of those dominant markets. But you don’t have to look too far beneath that surface to see that so much has changed. Whether normal service has resumed remains to be seen, but at least investors now have more opportunities.
Global, US and EM equities were among the main categories to gather assets in June, but thematic equity ETFs were also worthy of note. That smaller but diverse niche category captured the second-most net inflows in the month. AI-related themes garnered some interest, but investors were drawn particularly to ETFs targeting defence, with demand driven by the commitment by NATO members to increase spending.
In fixed income, June marked the strongest month since July 2024 both in terms of net new assets (US$8.9 billion) and the proportion of total NNA (37%). ETF investors continued favouring European exposures, including corporate and government bonds but also increased allocation to sectors that would generally benefit from a stronger economic climate, such as High Yield and EM government bonds.
The commodity asset class also saw a rebound in demand, with US$3bn of NNA. Flows into gold and silver ETCs could be a hedge against the still-uncertain economic outlook, with inflation concerns still prevalent and growth forecast to slow, while the USD is widely expected to weaken further. On top of this is the “OBBB”¹ and, if it passes, there’s the matter of weighing its impact on the national debt and its potential to stimulate the economy. Let’s just say… services may be subject to disruption.
Rotating in fixed income
In the wake of rapid widening following ‘Liberation Day’, credit spreads have settled again. Since peak spreads, investors have piled US$7.7bn into investment grade & high yield ETFs with 40% of this going to ESG funds. Investors may want to take heed of their exposure to the Energy sector when selecting sustainable products, particularly given ongoing tensions in the Middle East.
Quality isn’t a sacrifice
As growth slows and rates remain elevated, companies with strong fundamentals are likely to stand out. Quality-focused strategies offer resilience in uncertain markets and have historically delivered solid long-term returns, while still leaving room to benefit if the macro outlook improves.
Where to diversify if inflation is a risk
If the main purpose of diversification is to access differentiated sources of risk and return, what’s the best uncorrelated asset to include in portfolios when equities are at record highs and questions persist around growth and inflation in the world’s largest economy? Consider gold and broad commodities as potential ‘safe-haven’ assets.
Game-changing defence spending
NATO defence commitments represent a significant increase in potential spending. Investors have been building exposure to companies best poised to benefit, directing US$8bn of investment towards defence-focused UCITS ETFs through the first half of 2025, including US$1.5bn in June. Investors can capture this opportunity by targeting cutting-edge global defence companies with defence-themed ETFs.
Explore more in our latest ETF Snapshot.