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Market Chatter Suggests Investors Are Increasing Allocations to Mid- and Small-Cap Stocks


The chatter says funds are coming out of bonds.

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We're hearing chatter that says a very large re-allocation trade is occurring, out of bonds and into small-and-mid-cap ETFs, and I'm seeing some evidence to support the talk.

Trading volumes in the SPDR S&P MidCap 400 ETF (NYSEARCA:MDY), the ProShares Ultra MidCap400 ETF (NYSEARCA:MVV) (the 1x leveraged long version of the S&P MidCap 400), the iShares Russell 2000 Index ETF (NYSEARCA:IWM), the ProShares Ultra Russell2000 ETF (NYSEARCA:UWM) (the 1x leveraged long version of IWM), and the iShares Core S&P Mid Cap ETF (NYSEARCA:IJH) are all running at exponentially higher levels than normal and are leading the market. Trading volumes are at average levels for the iShares Core S&P 500 Index ETF (NYSEARCA:IVV) (S&P value stocks) and the iShares S&P 500 Growth Index ETF (NYSEARCA:IVW) (S&P growth stocks).

The suspected outflows are from bonds, but I'm not seeing anything abnormal in the representative ETF proxies, and I'm told that cash volume is not abnormal either. My custom index of municipal bond closed end funds is having a -1.7 standard deviation day, but this is not entirely abnormal given the sell-off in rates. The similar index of credit funds is down, but less than I would have expected.

Twitter: @MichaelSedacca

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