14/01/25 13:36:00

ETFs: "Lots of fresh money at the start of the year"

Concerns about tariffs and interest rates? This is not an issue on the ETF market, the buying mood continues. The major indices in particular are in demand, as are tech ETFs. However, individual S&P 500 trackers are also on the sell lists. 


14 January 2025 FRANKFURT (Frankfurt Stock Exchange). The brisk demand for ETFs continues. “As usual at the beginning of the year, a lot of fresh money is coming into the market, from both institutional and private investors,” reports Frank Mohr from Société Générale and reports a clear buying overhang. Holger Heinrich from Bader Bank takes a similar view: “With turnover picking up significantly, we had a good 80 percent more buys than sells,” explains the trader.

The DAX stood at 20,295 points at midday on Tuesday - an increase of 2 percent compared to the end of 2024. By contrast, the US markets have recorded losses since the beginning of the year, with the S&P 500 down a good 1 % and the Nasdaq 100 down 1.6 %.

World ETFs are most popular

Always popular: World ETFs, above all the iShares Core MSCI World (IE00B4L5Y983), as Mohr observes. “World ETFs are almost exclusively bought,” Heinrich also notes. This applies to standard trackers such as the Invesco FTSE All-World (IE0000QLH0G6) and the UBS MSCI World (IE00BD4TXV59), but also dividend (IE00BF2B0M76) and small cap ETFs such as the SPDR MSCI World Small Cap (IE00BCBJG560). Ivo Orlemann from ICF Bank also sees continued interest in MSCI World ETFs (IE00B60SX394). “That always works, just like DAX trackers (DE000ETFL011).” Mohr also reports some turnover for the Xtrackers DAX (LU0274211480), albeit in both directions. European equities are even mostly on the sell lists at Baader Bank, specifically Euro Stoxx 50, DAX and MDAX ETFs.

The picture is also mixed in the US equities business. Mohr reports inflows into S&P 500 and Nasdaq trackers, while Heinrich reports outflows from S&P 500 ETFs such as the Invesco S&P 500 (IE00BYML9W36). On the buy side, according to Heinrich, there are Nasdaq 100, MSCI USA and MSCI USA Leaders ETFs.

According to Orlemann, dividend ETFs such as the VanEck Morningstar Developed Markets Dividend Leaders (NL0011683594) are also in demand. This focuses on companies from industrialized countries with reliable dividend payments and also uses an ESG filter. 

Brazil ETFs on flop list. Not all ETFs performed well in 2024. The ETFs with the worst performance include many Brazil ETFs with losses of 27 percent, according to the analyst firm Morningstar. Examples include iShares Brazil, Amundi MSCI Brazil, Xtrackers Brazil as well as Latin America trackers from Xtrackers, iShares and Amundi. However, the worst performers were Invesco Solar Energy (IE00BM8QRZ79) and VanEck Rare Earth and Strategic Metals (IE0002PG6CA6), which fell by 33 and 31 percent respectively. 

Tech sector remains favorite

In the sector ETF business, tech trackers continue to make up by far the largest share, at Société Générale it is 40 percent, as Mohr notes. Xtrackers Artificial Intelligence & Big Data (IE00BGV5VN51) and Xtrackers MSCI World Information Technology (IE00BM67HT60) are doing well. Healthcare stocks, on the other hand, were sold, for example with the iShares S&P 500 Health Care Sector (IE00B43HR379). The defense sector remains extremely popular, as Orlemann reports, specifically VanEck Defense (IE000YYE6WK5). Despite recent setbacks, the share price is still up 54% over one year and has almost doubled over two years. 

Back and forth in money market ETFs

According to Mohr, money market ETFs such as Lyxor Smart Overnight Return (LU1190417599) and Xtrackers II EUR Overnight Rate Swap (LU0290358497) have “firmly established themselves as a cash substitute”. These are sometimes bought, sometimes sold. European government bonds with medium maturities are also more likely to be bought. 

Cryptos: business in both directions

Calm has returned to cryptocurrencies. Bitcoin currently costs 96,500 US dollars, compared to a peak of 108,000 US dollars in mid-December. “A lot now depends on what Donald Trump will actually do with regard to cryptos,” notes Orlemann. Crypto ETN trading is also proceeding at a more leisurely pace. The focus is on “the old acquaintances”, i.e. Bitcoin (DE000A28M8D0), Solana (CH1114873776) and Ethereum trackers (CH0454664027) - with purchases and sales. “But we are also seeing business in Cardano and Ripple ETNs.” 

By Anna-Maria Borse, 14 January, 2025, © Deutsche Börse

Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.

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