ETF Sector Bleeding Cash Despite Market Records

US-listed ETFs attracted nearly $38 billion in the week ending Aug 15, with the S&P 500 and Nasdaq-100 recording new all-time highs. However, communication services and semiconductors experienced significant outflows, with the Communication Services Select Sector SPDR Fund XLC experiencing $3.4 billion in redemptions and the Direxion Daily Semiconductor Bull 3X Shares SOXL losing $1.5 billion. This indicates investors are rotating out of full, high-beta areas despite pumping funds into diversified, broad-market trackers.

US-listed ETFs attracted nearly $38 billion in the week ending Aug 15, continuing one of the strongest years in history for ETF inflows [1]. Both the S&P 500 and Nasdaq-100 recorded new all-time highs, lifting year-to-date ETF inflows to almost $730 billion. However, despite the overall market strength, some industries experienced significant outflows.

The Communication Services Select Sector SPDR Fund XLC, heavily skewed toward Alphabet Inc (GOOGL) and Meta Platform Inc (META), saw a whopping $3.4 billion in redemptions, the biggest of any ETF last week [1]. This occurred amidst concerns about ad-spend trends and decelerating growth at mega-cap internet platforms. Similarly, the Direxion Daily Semiconductor Bull 3X Shares SOXL lost $1.5 billion following a late-week selling in chipmakers, triggered by Applied Materials Inc (AMAT) earnings letdown [1].

These outflows indicate that investors are rotating out of full, high-beta areas despite pumping funds into diversified, broad-market trackers. The Invesco QQQ Trust QQQ topped the list of ETFs with $6.7 billion in inflows, followed by the Vanguard S&P 500 ETF VOO at $3 billion [2]. Both clinched record highs.

The outflows in communication services and semiconductors, two of the largest drivers of 2023–25’s bull run, suggest a transitioning market where investors are supporting diversified, broad-market trackers but reducing exposure to areas that appear extended following months of appreciation.

References:
[1] https://www.benzinga.com/etfs/sector-etfs/25/08/47221621/markets-at-record-highs-but-these-etf-sectors-are-bleeding-cash
[2] https://finance.yahoo.com/news/5-etfs-gained-investors-love-140000286.html