On the day Donald Trump won the presidency and the two days after last week, investors poured the most money into stock-based exchange-traded funds that they have in nine years.
The Republican's stunning upset found many traders offsides with bets that Hillary Clinton was going to prevail. In the week leading up to the election, short-term money was scrambling to hedge for a Trump victory, and the momentum hit a crescendo after the election and in the immediate aftermath.
Equity-based ETFs took in $22.6 billion, or about 1.6 percent of total assets, from Tuesday through Thursday, according to market data analysts at TrimTabs.
Every fund in the top 10 for inflows either was a direct equity play, or it played high-yield bonds, which usually move in parallel to stocks.
Where the Trump money's flowing
| Fund | Ticker | Net Flows ($B) |
|---|---|---|
| SPDR S&P 500 Trust | SPY | 11,010 |
| Finacial Select Sector SPDR | XLF | 2,510 |
| iShares Russell 2000 | IWM | 2,099 |
| Health Care Select Sector SPDR | XLV | 1,454 |
| iShares iBoxx $ HY Corporate Bondq | HYG | 1,452 |
| Industrial Select Sector SPDR | XLI | 817 |
| SPDR Barclays HY Bond | JNK | 793 |
| iShares Core S&P 500 | IVV | 785 |
| iShares Nasdaq Biotech | IBB | 782 |
| Vanguard S&P 500 | VOO | 574 |
Source: Source: FactSet
That's the highest influx since September 2007 and even more impressive considering that the jump back then came in large part due to options expiration. This time, it was a more organic move that saw money flow into equities with no other obvious catalyst than a repricing of the market due to a Trump victory.
"From our perspective, the election setup as a classic 'sell on the rumor and buy on the fact' trade as narrowing poll numbers left the market holding its (breath) leading up to Election Day," Craig Johnson, technical market strategist at Piper Jaffray, said in a note. "However, when the unknown variable was removed and Donald Trump became President-elect Donald Trump, investors realized that voters gave him a clear mandate for change (president and Congress)."
Piper Jaffray is Wall Street's strongest bull, holding a 2,350 end-of-year price target for the that suddenly looks attainable — about 8.4 percent from the Monday mid-morning level — after seeming out of reach during the market anxiety in the weeks before the election. (Piper whiffed on the same 2,350 target in 2015.)
Johnson pointed to an oft-cited statistic about election trends, namely that when the market sells off for the three months heading into the election, the party in power usually loses. That held true again this time, but much of the market still was caught off guard by the Trump win.
The big winners so far have been bank stocks, which have surged 13.2 percent over the past week as measured by the KBW Nasdaq Bank index.
A mild rally continued Monday, though the big push could take a pause.
"It would not surprise us to see some profit-taking in many of the stocks that experienced quick run-ups after the election, but long-term investors should likely leave the selling to the swing traders," Jeffrey Saut, chief market strategist at Raymond James, said in a note.
Indeed, TrimTabs, which advocates contrarian positions when buying or selling gets overheated, warned clients that the rush to ETFs could be a negative. It also pointed out that ETFs that bet against the market saw outflows that equated to 3 percent of assets last week, which it called "another negative contrary signal."
