ETF Inflows Signal a Shift: Growth Gains Momentum Over Value

Investors are sending a clear signal through their ETF allocations: growth stocks are back in favor, while value-oriented equities face skepticism. Recent inflows into the iShares Core S&P 500 ETF (IVV) and Invesco QQQ Trust (QQQ) reveal a pronounced rotation toward tech-driven growth, even as broader equity markets remain volatile. Let's dissect the data to understand where capital is flowing—and why.

The Case for Growth: QQQ's Dominance

QQQ, which tracks the Nasdaq-100 index, has emerged as the star performer. In May, it attracted $7.17 billion in net inflows—the second-highest monthly total for any ETF—and followed that with $793.5 million in June. Over two months, investors poured $7.96 billion into QQQ, pushing its year-to-date (YTD) inflows to $9.74 billion. This surge aligns with the Nasdaq-100's recent resilience, as tech giants like Apple, Microsoft, and Amazon rebound from earlier-year declines.

The ETF's success isn't merely about inflows; it reflects confidence in a sector that has historically thrived during periods of low interest rates and innovation-driven growth. Investors are betting that the Nasdaq-100's concentration in high-growth companies will outperform broader markets if economic conditions stabilize.

IVV's Volatile Journey: A S&P 500 Hesitation

The iShares Core S&P 500 ETF (IVV), by contrast, tells a more nuanced story. While it pulled in $1.05 billion in June—the largest single-day inflow for any ETF that month—its YTD performance remains negative at -$6.006 billion. This suggests that May's outflows (implied by the YTD figure) outweighed June's optimism.

The S&P 500's mixed performance this year, dragged down by sectors like energy and financials, may explain the hesitation. IVV's June inflow could signal a tactical bet on broad-market stability, but the YTD outflows highlight lingering doubts about value stocks and cyclical industries.

The Sector Rotation Playbook

The divergence between IVV and QQQ underscores a broader shift: growth is winning over value. This rotation is amplified by two factors:
1. Tech's Resilience: The Nasdaq-100's outperformance in 2025 has outpaced the S&P 500 by nearly 5 percentage points (as of June), attracting capital fleeing dividend-focused ETFs like the Invesco S&P 500 Capped Dividend Aristocrats ETF (RDVY), which saw massive outflows due to “heartbeat” trades.
2. Interest Rate Dynamics: With the Fed pausing rate hikes, growth stocks—which are more sensitive to discount rate changes—benefit from reduced pressure on their valuations.

Meanwhile, the $6.547 billion outflow from U.S. equity ETFs in June shows that investors remain cautious about equities overall. Yet within this sea of red, QQQ's consistent inflows highlight a strategic bet: tech and growth are the “least bad” options in an uncertain macro environment.

Investment Implications

For investors, the data suggests two paths:
1. Growth Exposure: Allocate to QQQ if you believe tech and innovation-driven sectors will continue to lead. Its YTD inflows and Nasdaq-100 exposure position it well for a recovery in risk-on sentiment.
2. Broad-Market Caution: IVV's mixed performance signals lingering doubts about value stocks. A tactical allocation to IVV might make sense for those seeking diversification, but avoid overloading until the S&P 500's fundamentals stabilize.

Risks and Considerations

• Valuation Concerns: The Nasdaq-100's premium valuation could limit upside if earnings fail to meet expectations.
• Volatility Lingering: Broader market outflows remind us that macro risks—trade tensions, geopolitical instability—remain unresolved.
• Dividend ETFs' Decline: Outflows from RDVY and FDL signal that income-seeking investors are skeptical about traditional value plays, but this could reverse if bond yields stabilize.

Final Take

ETF flows are a real-time snapshot of investor psychology. QQQ's dominance and IVV's tepid rebound point to a clear preference for growth over value—a trend likely to persist unless economic data sparks a cyclical rebound. For now, growth remains the story, but investors should pair exposure with hedges against macro uncertainty.

In the ETF arena, momentum favors the Nasdaq-100. But as June's data shows, markets are never one-dimensional. Stay nimble.