To The Moon

Yesterday, we reviewed developments in the newly launched ETF market .

According to publicly available data from FactSet, as of the end of January 2026, total assets under management (AUM) of U.S.-listed ETFs reached $14.1 trillion, with $174.1 billion of net inflows during the month.

Although this figure declined from December’s peak, historically, a pullback from December to January is typical. What truly matters is not whether flows remain positive, but where the money is going.

I. Asset Classes: Equities Still Dominate, but Bonds Are Accelerating

From an asset-class perspective, January ETF flows showed a very clear contrast:

Source: FactSet (as of January 31, 2026)

• Equity ETFs remained the primary destination for capital, attracting approximately $110.0 billion in net inflows. However, this represented a 36.2% decline compared with December.

• Fixed income ETFs recorded about $53 billion in net inflows, not only avoiding a slowdown but posting a 28% increase month over month.

• Commodity and asset allocation ETFs saw a clear cooling in demand.

• Alternative strategy ETFs continued to increase their share of total inflows.

The implication is fairly intuitive: 👉 Risk assets remain popular, but a growing portion of capital is placing greater emphasis on duration, income stability, and portfolio balance.

If you have been tracking bond ETFs such as AGG / BND / TLT, this trend is likely familiar.

II. Sector Flows: Financials and Energy Attract Capital, Technology Still “Bleeds”

If asset-class flows help gauge overall risk appetite, sector-level ETF flows provide a more granular view of how investors are positioning for the economic and earnings cycle.

January data showed a sharp divergence:

Sectors with net inflows:

• Financials ( $Financial Select Sector SPDR Fund(XLF)$ ) — January return: -4.60%

• Energy ( $Energy Select Sector SPDR Fund(XLE)$ ) — January return: +7.72%

• Health Care ( $Health Care Select Sector SPDR Fund(XLV)$ ) — January return: -0.79%

Sectors under continued pressure:

• Technology ( $Technology Select Sector SPDR Fund(XLK)$ ) — January return: +1.56%

• Consumer Discretionary ( $Consumer Discretionary Select Sector SPDR Fund(XLY)$ ) — January return: +0.74%

• Real Estate ( $Real Estate Select Sector SPDR Fund(XLRE)$ ) — January return: +2.33%

Source: FactSet (as of January 31, 2026)

One notable takeaway is that price performance and fund flows did not always move in the same direction. Financials and Health Care attracted capital despite negative January returns, while Technology and Real Estate posted gains even as fund flows remained under pressure.

From this heatmap, two market-driven signals stand out:

• Capital is gravitating toward sectors with visible cash flows and less extreme valuations.

• High-valuation, interest-rate-sensitive sectors continue to face a more cautious stance from investors.

In other words, ETF flows at this stage appear to reflect structural reallocation rather than broad-based risk-on or risk-off behavior.

III. ETF Launches: Fewer Products, but “Active + Leverage” Remain the Core Theme

In January 2026, 85 new ETFs were launched in the U.S., down approximately 35% from December’s 131 launches.

However, fewer launches did not mean less innovation:

Source: FactSet (as of January 31, 2026)

• More than 80% (69 ETFs) of new launches were actively managed.

• Issuers such as AXS and Themes continued to roll out single-stock daily leveraged ETFs, clearly targeting short-term trading demand.

• The use of leverage in new ETF products continued to increase (e.g., Toroso).

• BNY Mellon converted five fixed-income mutual funds into ETFs during the month.

This reflects a longer-term shift: 👉 ETFs are evolving from purely passive vehicles into platforms for strategy design, trading, and product packaging.

Questions for the Community

💬 Has your recent ETF allocation leaned more toward equities or bonds? Have you made any noticeable adjustments?

💬 Among XLF / XLK / XLE / XLV, which sector ETF do you find most attractive over the coming months?

💬 Would you consider trading single-stock leveraged ETFs, or do you prefer ETFs primarily as long-term allocation tools?

Feel free to share your thoughts in the comments 👇

Risk Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. ETF prices are subject to market fluctuations, and past performance is not indicative of future results.

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