ETF Commentary

ETF flows this year are running at record rates with over $1 trillion flowing into equity funds YTD bringing the total equity ETF AUM to 14.6 trillion.  Inflows were primary into large cap/tech funds with only 25 billion flowing into Mid-cap funds and a 9-billion-dollar outflow from small cap funds.  Fixed income flows were also strong at $445 billion YTD bringing the total fixed income ETFs to over $3 trillion.  Most of the flows were into investment grade funds with only $28 billion into high yield bonds and only 1.6 billion into preferred stocks.  Flows into fixed income accelerated after the Fed became more dovish.

We believe that dividend stocks may start to outperform as the Fed continues to cut rates this year and throughout 2026.  ICAP ETF seeks  large cap dividend exposure and writes individual short-term calls which we believe is superior to most call writing income funds that use index calls and tend to underperform in up markets.

For fixed income, we believe investors can benefit from seeking higher risk and higher yield funds which tend to do well when the Fed is lowering interest rates and equity markets are strong.  BNDS ETF seeks high yield from fixed income exposure and PFFA ETF seeks high yield from preferred stocks.