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Traders Buy Big-Cap US Stocks and Emerging Markets; Dump Gold

Wednesday, 6 Mar 2013 | 12:26 PM ET

Exchange-traded fund flows: Investors are turning to big-cap stocks, and swapping out of gold. Now that we are at new highs, I spent the morning combing through ETF inflows (creations) and outflows (redemptions) year to date, and ran my findings by Dave Nadig at IndexUniverse.

Here's what I see: Classic risk-on so far in 2013 ... getting in the market, and staying in the market.

Inflows:

1) The biggest success has been WisdomTree Japan Hedged Equity Fund (DXJ), which has gone from less than $1 billion in assets last year to $3.8 billion in the first two months of the year. Why? Shinzo Abe's election in Japan created a frenzy of speculation that he would re-flate Japan's economy — and stock market. The DXJ invests in Japanese stocks, but hedges out currency risk, especially important when you are buying the fund using dollars converting into depreciating yen. Result: instant success.


2) Big-cap U.S. stock indexes: Vanguard Total Stock Market (VTI), iShares Core S&P 500 (IVV), and Vanguard S&P 500 (VOO), all variations on buying the S&P 500, and all indications that investors are taking some money off the sidelines and into core big-cap stocks. Also some inflows into small caps: iShares Russell 2000 (IVM).

3) Emerging market funds like iShares Emerging Market (EEM) and Vanguard Emerging Markets (VWO), but not huge flows into other countries: not Europe, or Latin America.

4) Real estate: Vanguard REIT (VNQ).

Outflows (redemptions):

1) SPDR Gold (GLD) and other gold ETFs.

2) Some signs of a top in bonds. Modest outflows from iShares Investment Grade Corporate Bonds (LQD), iShares Tips (TIP), and iShares three-to-seven Year Treasury (IEI).

Bottom line: This is not the "Great Rotation" out of stocks and into bonds, but it is a sign that investors are favoring risk over defense, amid growth in emerging markets and the U.S.


By CNBC's Bob Pisani


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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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