Investors Go Full Tilt and Risk On

Track shifting investor sentiment through our latest ETF flows analysis.

Going full tilt refers to moving with as much speed or force as possible. The phrase’s origins can be traced back to the days of jousting, where going full tilt meant leaning into the attack with strength and determination.

In 2024, investors leaned into the US-tech heavy market rally with the passion of a jouster dueling in front of the King’s court. Their commitment is reflected both in ETF flows and the broader Federal Reserve Financial Accounts data on US household assets and wealth. That report shows US households now hold a record $47 trillion of equities and funds. That’s a $7 trillion year-over-year increase — and 35% above the prior 5-year average.¹

What do the full tilt ETF inflows say about investor buying behavior heading into 2025? Let’s find out.

ETF Inflows Set Records, Driven by a Q4 Risk-on Surge

US-listed ETFs had a record $1.15 trillion of inflows in 2024 — shattering the prior annual record of $909 billion in 2021. Reflecting the broad depth within the ETF industry, all three individual asset class segments posted records (Figure 1).

Equities took in $782 billion; fixed income had $303 billion; and “other/alternative” strategies amassed $64 billion, boosted by more than $45 billon into cryptocurrency exposures.

But record inflows weren’t a sure thing heading into the final months of the year. At the end of September, inflows were just over $700 billion.

ETFs then had the greatest three-month inflow of all time — taking in more than $430 billion during Q4 as the market rallied post-election. The record surge was fueled by December’s $150 billion (second-most) and November’s all-time record $160 billion.

During this time frame, the record inflow trends for bonds were massively overshadowed by equity ETF buying behavior. In fact, the rolling three-month flow differential between the two major asset classes reached a new record of $250 billion at the end of December (Figure 2). This is more than double the 80th percentile level and one of the starkest images of how forcefully risk-on investors turned heading into 2025.

Risk-on Investors Went Full Tilt Toward the US

Record equity flows (+$782 billion) — and, more specifically, record US equity flows (+$672 billion) — drove 2024’s record annual inflows and the Q4 surge as investors sought to ride US economic tailwinds.

This full tilt US flow trend is reinforced by these facts:

• 60% of the record $1.15 trillion of ETF inflows went into US equity ETFs.
• 87% of all equity ETF flows in December went into US equity ETFs (86% for all 2024).
• Only twice have US equity ETFs taken in more than $100 billion in a single month — November (+$122 billion) and December (+$107 billion) 2024. 
• US equity ETFs now have a record 22 consecutive months with inflows.
• US equity ETFs’ $672 billion in 2024 is more than non-US equity ETFs have cumulatively totaled over the past 87 months, back to October 2017.

With such strong inflows for US equities and a lack of interest overseas, the rolling three-month flow differential between US and non-US equity ETFs reached an eye-popping $250 billion.

This new record was entirely driven by positive sentiment in the US, as rolling three-month flow figures for US equities hit a record $290 billion while non-US remained range bound (Figure 3).

With the potential for growth-restraining tariffs on top of an already lower economic and fundamental growth profile, it’s no surprise investors are favoring the US while expressing a lack of optimism toward non-US markets.

Tech and Cyclicals Lead Sectors

Sectors had $43 billion of inflows for the year. December trends also reflect investors’ sector preferences. Cyclical sector flows were positive at $389 million, but uneven. Industrials and Financials had inflows in December and led sectors on the year.

Given the broad-based fervor for AI, technology ETFs (tech ETFs) had inflows once again in December. The $582 million of inflows increased tech ETFs’ lead versus all other sectors in 2024. In fact, their $33 billion represents 76% of all sector ETF flows in 2024 — well above their 37% market share of sector assets.

Even with tech ETFs’ inflows, and despite the risk-on mentality, sectors had outflows of $580 million in December, mainly from defensive sectors. That group lost $1.3 billion last month, their third consecutive month with outflows.

For the year, defensives had $6.7 billion of outflows, their second-worst year of outflows ever, behind the $16 billion of outflows in 2023.

Bond ETFs Boosted by Risk-on Credit

Credit sector ETFs (IG corporate, high yield, loans, convertibles, and preferreds) had inflows once again in December. Taking in a combined $5.2 billion, credit sectors finished the year with $87 billion of inflows.

This equates to 29% of all fixed income ETF inflows in 2024, above their 25% market share of bond ETF assets and a reflection of investors’ clear overweight toward credit in 2024.

But the flows within credit were uneven, as high yield had outflows. Loans, the other below investment-grade segment within credit, had inflows last month and took in a record $26 billion on the year.

Those loan asset class flows are supported by two trends: risk-on temperaments favoring risk taking within implicit equity-biased fixed income, as well as the positive effects on those securities’ floating rate coupons due to the reduction in forecasted Fed rate cuts that may no longer reduce their income generation as much.

Keep Calm and Risk On in 2025?

In 2024, everything was up. Stocks, bonds, commodities, and the US dollar all had gains. But, looking ahead, only twice in the past 50 years have all four asset classes had back-to-back yearly gains at the same time.²

With these record flows, investors aren’t positioning for disappointment in 2025, especially from equities where they have allocated the most capital. Instead, investors are tilting fully toward the US and positioning for 2025 to be a repeat of 2024, given the strong US economic and fundamental tailwinds relative to the rest of the world.

But numerous macro risks and an uncertain path for US fiscal policy could present challenges. And investors’ full tilt extrapolation of past return trends into the future, as opposed to being appropriately diversified, will be nothing more than tilting at windmills.

So, while US tailwinds remain strong and support global equity benchmarks, incorporating alternatives within portfolios may help balance full tilt beta risks and improve resiliency if cross-asset risks emerge and traditional markets can’t make it three times in the past 50 years with back-to-back gains.

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