Creation Of S&P 500 ETFs Rises To All Time High

Tyler Durden's picture

As if trying to figure out the impact of the central banks' balance sheets and China's record debt creation on stocks wasn't enough of a complexity (actually it really isn't that complex) for a market where fundamentals haven't mattered in 5 years, there is also the issue of ETF basket creation, best known for the daily 3:30 pm ramp when ETFs catch up with their underlying components in a rising market, giving it all a procyclical turbo boost.

It is here that SocGen reports that in the past fortnight, there was record equity ETF creation, mostly focusing on the S&P 500. To wit:

In the last two weeks, ETFs listed in Europe posted record fortnight net share creations year-to-date, reaching $5.2bn, i.e. twice as high as the YtD  fortnightly average. This boost was primarily driven by record creations on equity ETFs ($3.5bn vs $1.3bn on average YtD) while fixed income and commodity indexations held up well, above YtD averages ($1.3bn share creations on fixed income ETFs and $350m on commodity ETFs).



Primary market: signals from ETF creations & redemptions


Equity ETFs: record creations were mainly driven by US equity indexations which claimed $1.7bn net creations on the period. One ETF in particular, Vanguard S&P 500 UCITS ETF (VUSA LN), gathered nearly $1.1bn over the period which was not the result of an isolated asset allocation decision. In addition, iShares S&P 500 UCITS ETF (CSSPX LN) showed strong creations, partially driven by switches out of another iShares ETF providing the same exposure but suffering from higher management fees (IUSA LN). The other ETFs in the category contributed positively to total creations, signalling broad demand for US equity indices. Actually US equities look expensive in terms of P/BV ratios. However, in the context of an accelerating US economy as expected by our macroeconomists, there may be reasons to remain confident in US equities as long as there are no sharp US rate hike or external shocks. In the eurozone, most regional and all country ETFs recorded net creations on the period, in contrast to UK and Swiss ETFs. Our equity strategists have been bullish eurozone equities for a number of reasons including structural reforms, reflation policy and the ECB’s accommodative stance.



Secondary market: signals from ETF premiums & discounts


Signals from premiums and discounts broadly match the primary market ones but we noticed some divergences with regards to US equities, which somewhat mitigated the apparent strong investor demand for US equity indexations:

  • Lower market price relative to NAV than average on Japanese equities, Small Caps and HY corporate bond ETFs corroborated the redemptions or the modest creations observed on the primary market.
  • Similarly, higher-than-average premiums on eurozone equity ETFs were in line with the net creations on the primary market.
  • By contrast, US equity ETFs traded at a discount to NAV over the period, contrasting with the strong creations observed on the primary market.

What does it all mean? Simple: every structural element of this market has been geared to continue the "blow off top" mode, in self-fulfilling and recursive momentum "strategy" higher, newsflow and fundamentals be damned, until it no longer works. And with Yellen Capital LLC still seeing no bubble anywhere except in the stocks that have been the best performers since her FOMC appearance, it also means another thing: celebrate the collapse of the US middle class by BTFATH. Because when the music ends, it won't really matter considering that both the Fed and all of its central bank peers are already "all in".

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QEternity's picture

Gotta know when to hold em, know when to fold em

icanhasbailout's picture

guess what else is at an all-time high


have you ever looked at your paw? I mean, really looked at it?

aVileRat's picture

Yeah, if this drops more than 2% in a day; it will make 1987 look like a "breather", which it was; ironically.

I shudder to think what sort of repo chains or deriv structures are moving on top of main market equity flows which never show up in daily market volumes or retail put/call spreads.


Ben Ghazi's picture

"Know when to walk away,"


"Know when to run - from this Fed Fuck, bubble blown shitshow called the stock market"

lasvegaspersona's picture

but could something bad happen...?

GreaterFool1965's picture

bad is good, and good is better.  Algos programmed to levitate knowing someone will always chase.

AccreditedEYE's picture

When the story said "bullish on Euro equities due to structural reforms..." I laughed so hard that I couldn't even finish the article.

Say what you will about Tyler(s) but they give plenty of space to people who oppose their personal views.

Last, no, nothing bad is going to happen. Hell, you will have people calling for a gap-fill on AMZN tomorrow. Wouldn't be surprised if they cut loss in half. (Fundamentals don't matter, even if the President doesn't know it)

Greenskeeper_Carl's picture

My personal favorite part was"in the context of a growing US economy."
They must have missed the -3% GDP last quarter, or the dismal numbers that keep showing up. They've been saying growth will take off next year for the last 5 years, never mind the fact that even if we had a healthy economy we would be due for a pullback. Fucking clowns.

Luckhasit's picture

In this economy in this market, there is no bad.  Just good and looking better.

If/when we see bad, it won't be bad.  

Because it'll be the end of it all.

New days new beginnings.  

ebworthen's picture

FED has your back for now; ride the bubble, with other people's money.

Skim the profits, and when the savers get crushed in the next collapse laugh all the way to the bank.

p.s. - Amazon misses earnings, couldn't possibly be due to a suck ass economy, must need some buybacks and layoffs.

kaiserhoff's picture

I'm going to start an ETF based on the Fed.

We will measure progress by how quickly Yellen goes bald and grows a beard.

Who's in?

motorollin's picture

I'm in for Jan 2015 LEAPS.

skank's picture

Spider-man Original Cartoon Theme Song with lyrics

Spiderman, Spiderman,
Does whatever a spider can
Spins a web, any size,
Catches thieves just like flies
Look Out!
Here comes the Spiderman.

Is he strong?
Listen bud,
He's got radioactive blood.
Can he swing from a thread
Take a look overhead
Hey, there
There goes the Spiderman.

In the chill of night
At the scene of a crime
Like a streak of light
He arrives just in time.

Spiderman, Spiderman
Friendly neighborhood Spiderman
Wealth and fame
He's ingnored
Action is his reward.

To him, life is a great big bang up
Whenever there's a hang up
You'll find the Spider man.

Oscar's picture

Here's a free technical take on today's gold & silver sell-off:


moneybots's picture

  "However, in the context of an accelerating US economy as expected by our macroeconomists, there may be reasons to remain confident in US equities as long as there are no sharp US rate hike or external shocks."


The unexpected, always happens.

How many economists expected a -3GDP in the first quarter?

Fuku Ben's picture

Why not. Isn't every Friday an up day?

I'll file the paperwork for the Zero Hedge S&P 500 ETF on Monday. Of course, assuming we're all still here.

Kreditanstalt's picture

There is very, very little REAL "growth" anymore anywhere.  The players are becoming desperate, cannibalizing one another via mM&A,  and betting & yield-chasing have replaced value investing designed to fund legitimate business opportunities and real growth.


What will happen to the investment world when, one day, every symbol on every index consists of some ETF or similar derivative-for-bettors...?

One wonders where real value will then lie...

Kreditanstalt's picture

And on that glorious day when every last unit of fake "capital" is in these artificial markets, all it will take is for one domino to whisper "Sell!" and the rush for the exits will be SIMPLY STUNNING TO BEHOLD.

We'll see so much "wealth" vanish in minutes as everything fake goes "no bid" on the way down.