The latest data from the ETF market shows that investors were a little less 'America first' in January than they were in a record-setting December.
Investors poured more than $40 billion into ETFs in January, still a big month, but for a change the U.S. stock market wasn't running away with post-election investing dollars. December had set a monthly record for ETF flows, at $60 billion.
January was notable for investors balancing their bets. Overseas stocks and bonds received investments at a level that was close to U.S. stocks. The $15.5 billion that came into U.S. stocks ETFs in January was well below the $47 billion taken in by these funds in December, according to monthly flows data from FactSet Research. In January, international stock ETFs and bond ETFs almost kept pace, each taking in more than $12 billion from investors.
Meanwhile, the SPDR S&P 500 had outflows of $1.6 billion, leading the losers in January.
Emerging markets, international equities and investment-grade bond ETFs were among the top 5 for flows in January (the iShares Core MSCI Emerging Market ETF, iShares Core MSCI EAFE and the iShares $ iBoxx Investment Grade Corporate Bond ETF). That runs counter to fears about the end of a 30-year bull market in bonds, as well as predictions of continued emerging markets weakness due to a strong dollar and potential trade war.
"It's healthy to not see flows dominated by one area of the market," said Todd Rosenbluth, head of mutual fund and ETF research at CFRA.
Rosenbluth stressed that he does not make calls on the direction in any asset class — including bonds and emerging markets — but he said that even if investors have good reason to be cautious, investors have to invest beyond U.S. equities, even if U.S. stocks are the best-performing assets. "You still want income from corporate bonds and international exposure. If emerging markets are stronger than expected, you want to get some counterbalance to the U.S.," he said. "The U.S. is not the place to put all your money."
U.S. bond ETFs doubled their inflows month over month, from roughly $6 billion to $12 billion, while international increased by a little over $1 billion.
Investors are still betting heavily. December's $61.5 billion pushed 2016's total net creations to a record $287.5 billion for ETFs. The $40 billion figure for January exceeds last year's monthly average by $14 billion and puts 2017 on track to be the year when the ETF industry breaks through the $3 trillion in assets mark, according to FactSet data. (It currently stands at $2.64 trillion in assets.)
Commodities fell out of favor with roughly $790 million in net outflows, and the SPDR Gold Trust lost $866 million alone, in a bet that may have proved premature. Gold is up year-to-date by roughly 6 percent.
Rosenbluth said the move out of gold and other big ETFs, including the SPDR S&P 500 and Powershares QQQ Trust, makes the $41 billion haul all the more impressive. "When you score a lot of runs even though your cleanup hitter strikes out four times, it's a good thing. Three heavyweights among the biggest outflows and ETFs still doing well."
He said that lower-cost building-block ETFs dominated (the SPDR S&P 500 tends to be more popular with traders), and that points to the thinking of long-term investors. "For those first putting a market strategy in place, these flows fit into that approach."
Schwab ETFs took in more in January, at over $2 billion, than the SPDR ETF group, at $1.3 billion.
—By Eric Rosenbaum and Ashley McHugh-Chiappone, CNBC.com