US Equities Win Best in Show
Track shifting investor sentiment through our latest ETF flows analysis.
There are a lot of breeds that make the final grouping at the American Kennel Club National Dog Show. And while they all sparkle with talent, only one is named “Best in Show.” This year, Vito the Pug triumphed.
Based on returns, US equities are the Vito the Pug of this year’s stocks grouping. After a 6% gain in November, US equities are now up 26% in 2024.1 Meanwhile, non-US equities, impaired by post-election tariff fears, fell 1% and now have a pedestrian 5% gain.2
That’s a 21% return disparity for 2024. And if it holds, that would make US stocks the equity regional “Best in Show” winner for 13 out of the past 15 years. The 21% current calendar-year return difference is also the largest differential in that 15-year run.3
But the big barking question is: Did flows follow returns?
US Equities Take in 97% of Equity ETF Flows in November
Sustaining momentum and success in the dog competition industry is hard. There have been only seven repeat Best in Show winners in the 125-year history of the American Kennel Club National Dog Show.
Sustaining momentum in ETF flows is a bit easier. After posting $120 billion of inflows in October, ETFs took in a record-smashing $164 billion in November. Plowing past the prior annual record of $909 billion set in 2021, ETFs have taken in $993 billion through November.
With one month left to go in 2024 and December historically registering the highest monthly inflows, total ETF inflows could surpass $1.12 trillion by the end of the year. Mutual funds had net outflows of -$270 billion in 2024,4 cementing ETFs as the vehicle of choice for investors deploying capital — strategically or tactically.
For a tactical trend, with US equity markets soaring and international equities sagging, investors loaded up on the US with a record $122 billion of inflows — 97% of November’s equity inflows. Outpacing the $90 billion of inflows from December 2023, this pushed 2024 US equity inflows to $561 billion, breaking 2021’s $485 billion annual record.
Outside the US:
- Core-oriented global and developed ex-US exposures had inflows
- Emerging market flows were flat
- More precise tactical international exposures suffered net outflows, with regional ETFs dragged down by $2 billion of out of Europe and single-country ETFs hit by $5 billion of outflows from China
Figure 1: Equity Geography Flows
| In Millions ($) | November | Year to Date | Trailing 3 mth | Trailing 12 Mth | Year to Date (% of AUM) |
|---|---|---|---|---|---|
| U.S. | 122,294 | 561,145 | 226,365 | 646,071 | 11.01% |
| Global | 4,590 | 13,420 | 9,887 | 14,603 | 7.07% |
| International: Developed | 5,913 | 60,057 | 21,473 | 70,339 | 8.78% |
| International: Emerging Markets | 258 | 8,492 | 4,654 | 13,462 | 3.50% |
| International: Region | -1,944 | -2,124 | -2,790 | -1,292 | -3.18% |
| International: Single Country | -6,299 | 8,220 | 6,930 | 11,001 | 7.61% |
| Currency Hedged | 563 | 4,862 | -1,073 | 4,903 | 25.67% |
Source: Bloomberg Finance, L.P., State Street Global Advisors, as of November 30, 2024. Top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
With such strong flow momentum 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 record $188 billion.
This new record was driven by positive sentiment in the US, as rolling three-month flow figures for US equities hit a record $221 billion while non-US remained range bound (Figure 2).
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 over non-US markets (particularly Europe and China). And recent French budgetary turmoil makes this trend more likely to continue.
Cyclical Sectors and Credit ETF Flows Signal Risk on Optimism
Boosted by cyclicals’ $11 billion, sectors took in $15 billion in November.
The $8 billion of inflows into Financials led the way, as investors positioned for a policy framework that may feature less regulation for financial firms amid a fundamental backdrop where the financial sector is projected to have the highest earnings-per-share (EPS) growth out of any sector in 2025 (+38%).5
The potential for pro-growth fiscal policies fueled inflows into other cyclical markets, with Energy, Consumer Discretionary, and Industrial sectors all having over $1 billion of inflows in November. Real Estate was the only cyclical sector with outflows.
With so much risk-on optimism, defensive sectors witnessed $2 billion of outflows. All three defensive sectors had outflows. On a rolling three-month basis, the difference between cyclical and sector inflows is now back above the 80th percentile, at $13 billion in favor of cyclicals.
Figure 3: Sector Flows
In Millions ($) |
November |
Year to Date | Trailing 3 Mth | Trailing 12 Mth | Year to Date (% of AUM) |
|---|---|---|---|---|---|
| Technology | 5,269 | 28,688 | 5,263 | 27,020 | 12.20% |
| Financial | 7,797 | 10,920 | 5,758 | 12,496 | 16.19% |
| Health Care | -949 | -6,184 | -2,907 | -7,783 | -6.59% |
| Consumer Discretionary | 1,076 | 1,957 | 1,894 | 3,109 | 5.22% |
| Consumer Staples | -559 | -1,302 | -708 | -2,444 | -4.97% |
| Energy | 1,507 | -2,210 | -239 | -3,401 | -2.85% |
| Materials | 360 | -1,107 | 629 | -1,952 | -3.02% |
| Industrials | 1,524 | 4,833 | 2,144 | 4,903 | 11.69% |
| Real Estate | -1,068 | 4,434 | 1,003 | 6,395 | 5.95% |
| Utilities | -536 | 1,489 | 104 | 1,714 | 6.79% |
| Communications | 616 | -1,228 | 15 | -274 | -5.69% |
Source: Bloomberg Finance, L.P., State Street Global Advisors, as of November 30, 2024. Top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
The risk-on sentiment led investors to rotate away from long-term government bonds, with that grouping having $4 billion of outflows and dragging down the broader government sector (-$562 million).
The same risk-on sentiment led credit-related sectors to take in $12 billion in November. Within that group, floating rate senior loans and CLO exposures took in a record $5 billion and now have an annual record inflow of $23 billion year to date.
Those loan asset class inflows are supported by two trends: 1) risk-on temperaments favoring risk taking within implicit equity biased fixed income 2) 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.
On the year, credit-related sectors have $79 billion of inflows, or 28% of all fixed income flows. That’s above their market share of assets (25%) and reflects the overweight to credit by investors.
Figure 4: Bond Sector Flows
In Millions ($) |
November |
Year to Date | Trailing 3 Mth | Trailing 12 Mth | Year to Date (% of AUM) |
|---|---|---|---|---|---|
| Aggregate | 11,025 | 117,105 | 46,686 | 129,249 | 23.17% |
| Government | -562 | 55,246 | 5,216 | 52,253 | 14.52% |
| Short Term | 3,432 | 11,149 | 3,805 | 4,533 | 5.48% |
| Intermediate | 421 | 28,450 | 5,545 | 27,860 | 23.98% |
| Long Term (>10 yr) | -4,416 | 15,647 | -4,134 | 19,861 | 18.39% |
| Inflation-protected | -92 | -3,196 | -764 | -6,462 | -5.33% |
| Mortgage-backed | 3,059 | 14,025 | 6,155 | 14,952 | 22.76% |
| IG Corporate | 2,548 | 37,211 | 7,451 | 44,786 | 15.81% |
| High Yield Corp. | 3,237 | 15,083 | 5,774 | 19,333 | 20.64% |
| Bank Loans and CLOs | 5,758 | 22,835 | 10,521 | 24,635 | 108.55% |
| EM Bond | -282 | -145 | -835 | 1,174 | -0.48% |
| Preferred | 287 | 3,091 | 1,506 | 3,474 | 9.09% |
| Convertible | 450 | 894 | 1,111 | 969 | 16.43% |
| Municipal | 3,563 | 17,280 | 8,597 | 19,056 | 13.95% |
Source: Bloomberg Finance, L.P., State Street Global Advisors, as of November 30, 2024. Top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
Will the US Remain the Big Dog in 2025?
There is more to the US’s reign than the recent post-election rally narratives. For starters, the US has had stronger fundamental momentum in 2024. Trailing one-year earnings growth is 9% for the US versus 6% for the rest of the world.6
Forward-looking sentiment is strong too. The US is projected to have stronger earnings growth in each of the next four quarters — six percentage points, on average, higher than the rest of the world.7
While US stocks may be “Best in Show,” there are competitors in the broader cross-asset grouping that could win “Reserve Best in Show” — like Verge the Welsh Terrier. For example, bonds, commodities, and the US dollar are also up in 2024. And while up only single digits, the gains still reflect a Goldilocks-like environment for traditional portfolios.
Because these four cross-asset markets have had back-to-back yearly gains just twice in the past 50 years — there may be some potential for disappointment in 2025.8 And while US tailwinds remain strong and are supporting global equity benchmarks, adding alternatives to portfolios may help balance beta risks and improve overall resiliency if there’s no “Best in Show” repeat from risk assets.
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