S&P 500, Gold, Oil Fund Flows As Virus Cases Rise

While vaccination efforts continue strongly in the US, health officials have begun to sound alarms over sharp rises in Covid cases in certain regions. In Europe, where vaccination efforts have not been nearly as effective, a resurgence in virus cases has already triggered new lockdowns and restrictions. While the Fed and ECB continue to keep their feet down on the monetary stimulus pedal, other central banks are beginning to reduce their support. The Bank of Canada recently began providing guidance on tapering. The US yields also continue to remain elevated. All these factors have coalesced to threaten sentiment around risk assets.

The S&P 500 hit a new all-time high in mid-March, just a few dozen points shy of the 4,000 level. Since then, the index has slipped slightly lower, currently trading around 3,850. While US 10yr Treasury yields have stepped back from their highs around the 1.75% level, they remain around 1.60%, above the S&P 500’s estimated dividend yield. Another move higher in rates could put further pressure on the index.

SPY, S&P500, ETF, SPY Fund Flows

The SPY ETF, which tracks the S&P 500, has been mixed in the new year. Since January 1st, the ETF has seen around $3 billion in net outflows. In recent days, the ETF has seen its largest inflows in 2021. While the driver of these flows may be dip buying activity or the effect of retail investors pouring their stimulus checks into the stock market, the ETF may continue to struggle as the variety of macro themes play out.

The rise in US Treasury yields and other benchmark interest rates have not been kind to Gold. The precious metal steadily slipped lower since early 2021, falling from above 1,950 to a low around 1,680 in early March, its lowest point since June of 2020. Gold has rebounded slightly from this low to consolidate around the 1,730 level, far below the levels it traded at throughout the second half of 2020.

Gold, GLD, GLD ETF, GLD ETF Fund Flows

The Gold-linked GLD ETF has seen consistent large outflows since Gold hit its record high around the 2,000 level in early August. Once gold hit this record, investors began to take profits, driving the price back downward and driving the moving average of GLD ETF flows into negative territory.

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