Record ETF inflows suggest Canadian investors are favouring US equities as they navigate market volatility
Canadian investors are on track to allocate a record amount of capital to exchange-traded funds (ETFs) this year, according to Valerie Grimba, director of ETF sales and strategy at RBC Capital Markets.
Grimba shared insights during an interview with BNN Bloomberg, highlighting the growing interest among Canadians in ETFs, particularly those linked to US equities.
“July was another strong month for ETF flows; it’s kind of following on a big year for 2024 actually, we’re on pace to hit the highest level of ETF fund flows ever, surpassing 2021’s record,” Grimba stated.
She noted that many investors are using ETFs as a vehicle to navigate the complex macroeconomic environment.
Grimba pointed out that Canadian investors continue to show a strong preference for big technology names, which have been a driving force in US markets throughout the year.
“(Tech) still is the dominant story, I like to say it’s kind of like a black hole, this gravitational force pulling everyone towards US equities,” she explained.
The trend is evident in the significant inflows into Canadian-listed S&P 500 ETFs, even during periods of market volatility, such as last week’s abrupt selloff in US stocks. This behaviour suggests that many Canadian investors are “trying to buy the dip.”
The robust ETF activity in July, a typically slower summer month, indicates a shift in the Canadian investing landscape. Grimba attributed the rising popularity of diversified investments like ETFs to the prevailing sense of uncertainty amid global geopolitical and economic developments.
“The path isn’t clear … obviously there’s a lot going on geopolitically, elections, the rate-cutting cycle – there’s just a lot of gyrations happening under the surface,” she said, adding that investors are attempting to stay ahead of potential challenges as events continue to unfold.
