Macro Overview
U.S. equities ended the session on Friday, August 29th, on a negative footing as investors squared positions ahead of the long Labor Day holiday weekend and a week packed with key economic data. The broad market showed signs of risk-aversion, with defensive sectors outperforming while high-growth areas faltered. The S&P 500 (IVV) reflected the cautious sentiment, closing down -0.59%. The negative tone was particularly evident in technology stocks, with the Technology Select Sector SPDR Fund (XLK) falling -1.53%, and in the digital asset space, where the iShares Bitcoin Trust (IBIT) saw a significant drop of -3.37%.
U.S. Size & Style
A clear divergence between growth and value styles marked Friday’s trading. Large-cap growth stocks led the market lower, with the iShares S&P 500 Growth ETF (IVW) declining by -1.14%. In contrast, value-oriented equities held up better, as the iShares S&P 500 Value ETF (IVE) managed a slight gain of 0.04%. This single-day rotation into value stands in contrast to the longer-term trend, where IVW’s YTD return of +13.43% has more than doubled that of IVE. Despite the risk-off mood, investors showed renewed interest in small-caps, with the iShares Russell 2000 ETF (IWM) attracting the largest 1-week inflows among all size and style funds at +$1.51 billion.
U.S. Sectors & Industries
A defensive rotation was evident across the S&P 500 sectors. Health Care (XLV) and Consumer Staples (XLP) were the standout performers, gaining +0.73% and +0.65%, respectively. On the other end of the spectrum, the Technology (XLK) and Consumer Discretionary (XLY) sectors faced the heaviest selling pressure, falling -1.53% and -1.03%. The semiconductor industry was a notable pocket of weakness, with the SPDR S&P Semiconductor ETF (XSD) dropping -2.42%. Investor sentiment mirrored this performance, as the Financial Select Sector SPDR Fund (XLF) pulled in +$1.50 billion over the past week, while the iShares Semiconductor ETF (SOXX) saw outflows of -$380 million.
Global Thematic
Thematic ETFs saw mixed results, with a clear preference for safe-haven assets over speculative growth themes. Precious metals miners were a bright spot, driven by a bid for safety; the VanEck Gold Miners ETF (GDX) saw a strong rally. Conversely, strategies focused on disruptive technology and artificial intelligence experienced a significant pullback, with the Spear Alpha ETF (SPRX) leading the laggards with a -3.69% decline. Fund flows underscored this trend, as GDX attracted +$375 million in new assets over the week.
Developed Markets ex-U.S.
International developed markets broadly followed the U.S. lower, with the iShares MSCI EAFE ETF (EFA) finishing the day down -0.59%. Asian markets were particularly weak, with notable declines in South Korea (EWY), which fell -1.90%, and Japan (EWJ), down -1.27%. Bucking the trend was Canada, as the iShares MSCI Canada ETF (EWC) posted a solid gain of +0.68%, making it a rare source of strength in the global landscape.
Emerging Markets
A stark divergence characterized performance within emerging markets. China-focused ETFs stood out with impressive gains, as the iShares MSCI China ETF (MCHI) climbed +1.42%. This strength was isolated, however, as many other large developing nations faced significant selling pressure. The iShares MSCI Indonesia ETF (EIDO) was the worst performer, tumbling -2.86%, followed by losses in Taiwan (EWT) and India (INDA), which fell -1.80% and -1.07%, respectively.
Fixed Income
The bond market reflected caution as longer-duration assets sold off while investors sought safety in high-quality corporate debt. The iShares 20+ Year Treasury Bond ETF (TLT) experienced losses as yields ticked higher on the long end of the curve, and the core iShares U.S. Aggregate Bond ETF (AGG) declined by a modest -0.13%. Demonstrating a flight to quality, the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) was a major beneficiary of investor demand, pulling in a substantial +$1.24 billion in inflows over the past week.
Commodities
Commodities saw a distinct flight to safety, with precious metals outshining the rest of the complex. Gold (GLD) gained +0.96% and Silver (SLV) jumped +1.89% as investors sought tangible assets amidst market uncertainty. In contrast, energy markets were soft, with the United States Oil Fund (USO) declining by -0.53%. Investor flows confirmed the safe-haven demand, with the SPDR Gold Shares (GLD) experiencing massive weekly inflows of +$2.27 billion.
Cryptocurrency
The digital assets market experienced a sharp sell-off, indicative of broad risk-aversion among investors. Bitcoin, tracked by the iShares Bitcoin Trust (IBIT), fell -3.37%, while Ethereum, tracked by the iShares Ethereum Trust (ETHA), dropped -2.23%. Despite the negative daily price action, flows into Ethereum-focused products were remarkably strong over the past week, totaling over +$1.57 billion, suggesting some investors are accumulating on weakness.
What to Watch Today
With markets returning from the Labor Day holiday, all eyes will be on the August ISM Manufacturing PMI data. This report is a crucial gauge of the health of the U.S. manufacturing sector and is closely watched for its timeliness. Investors will scrutinize the headline number and its sub-components, such as new orders and prices paid, for signs of how businesses are navigating persistent tariff-related headwinds and global trade tensions. A weaker-than-expected reading could amplify recession fears and increase pressure on the Federal Reserve to cut rates, while a surprisingly strong number could alleviate economic concerns but potentially complicate the Fed’s policy path.
For a deeper dive into the data, access today’s full Daily ETF Data Pack.
Disclosures
This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
