Welcome to ETF IQ, a weekly newsletter dedicated to the $14 trillion global ETF industry. I'm Bloomberg News reporter Isabelle Lee, filling in for Katie Greifeld.

Rush to Safety

Though you wouldn’t know it looking at big benchmarks the last few weeks, skepticism has yet to be banished from Wall Street, with everything from tariffs to economic angst and inflation renting space in investors’ heads.

Worried exchange-traded fund investors have been busy plowing billions into various inflation-sensitive trades. April saw $4.3 billion deposited in ETFs tracking gold, commodities and inflation-linked bonds, as consensus estimates of future price pressures jumped to an almost three-year high. The cohort’s trailing three-month flows totaled $22 billion, just a tick below levels in 2020, data crunched by State Street Global Advisors show.

“Investors started to add some resiliency to portfolios,” wrote Matthew Bartolini, head of SPDR Americas Research. “Given that inflation-linked bonds and gold carry a positive economic relationship to falling growth dynamics, investors appear to be preparing for stagflation.”

The rush to safety represents a broader embrace of haven assets that took root during the tariff blowup. A basket of so-called haven ETFs monitored by Bloomberg Intelligence, which tracks gold, ultra-short Treasuries and low-volatility stock ETFs, took in $13 billion last month, the highest since October 2023.

The SPDR Bloomberg 1-3 Month T-Bill ETF (ticker BIL) hauled some $6 billion for the month, followed by iShares Short Treasury Bond ETF (SHV) and iShares 1-3 Year Treasury Bond ETF (SHY) at $2 billion and $1.5 billion, respectively. Gold-related funds saw three straight months of inflows to the tune of $12.5 billion while low-volatility equities saw traders piling in after an almost two-year exodus.

That said, traders of all stripes also continued to plow cash into broad-based index-hugging funds with inflows hovering above average levels. Atop the leaderboard is the Vanguard S&P 500 ETF (VOO), which has lured $20 billion alone in the past month.

“At the moment, we like gold, we like the tech sector,” said Jason Draho, head of asset allocation Americas at UBS Global Wealth Management. “But we are a bit cautious because it’s just hard to have a lot of conviction at this point in time where you’d want to make a big swing.”

Nervousness lingers with the growing possibility that trade-related uncertainty could lead to stagflation — a mix of sluggish growth and high inflation — that represents a nightmare scenario for earnings. Federal Reserve Chair Jerome Powell said as much on Wednesday when he warned that Donald Trump’s trade offensive heightens risks on both the growth and price-pressure fronts.

Potential Blowup

Single-stock ETFs have never been for the faint of heart. That isn’t likely to change as Wall Street beats the bushes for new candidates to package and sell to tap into the frenzied demand for the products.

About 80 individual stocks are now available to trade in roughly 160 different ETFs, data compiled by Bloomberg Intelligence show. The famously turbulent products have found a rapt clientele among day traders looking to harness their leveraged returns for quick market scores.

A look at the pipeline shows companies next in line for the treatment are even faster moving than those that came before. Their average volatility is twice as high as ones that already trade, possibly a result of their size, data compiled by Bloomberg Intelligence show. The median market value of the proposed newcomers is around $14 billion, compared with $156 billion in the existing universe.

Single-stock ETFS — which includes both leveraged and options-linked funds — have attracted roughly $28 billion in the US since their debut some three years ago. That phenomenal rise underscores not only a cultural shift toward acceptance of speculation but competition among Wall Street issuers, who are taking ever-more aggressive steps to stand out among the thousands of funds in the $10.6 trillion US ETF ecosystem.

Some say it’s all fair game in the ETF world. The product press will continue to print so long as there is market demand. Still, BI’s Athanasios Psarofagis warns that some of these high-octane products are at high risk of wiping out completely. His calculations show more than two dozen instances since 2020 in which one of the 80 underlying stocks had a more than 50% daily move — twice exceeding a 50% loss.

“There’s potential for one of these products to lose their complete value in a single day,” he said. “Still, it seems not even a blow-up will prevent investors from using ETFs.”

Just this week, nearly three dozen leveraged single-stock ETFs were filed by REX Shares ETFs and Trader ETFs. To Todd Sohn of Strategas Securities, the methodological process of selecting which companies to wrap into an amplified bet seems challenging.

Based on his computations, finding success in the single-stock space has been sparse. Outside of Tesla Inc., Nvidia Corp. and Michael Saylor’s Strategy (previously MicroStrategy) — the three companies with the greatest number of funds and the largest assets under management within those funds — most have seen lackluster demand. 

“It’s very much a box-office approach,” he said. “Make 12 films in a year, hope two or three are blockbusters.”

In Other News

A time-honored signal heeded by Wall Street’s credit industry — the weekly flow of money — is breaking down as fast-money ETFs muddle buy and sell signals.

A pair of long-short trades — pitting Bitcoin against gold, and vice versa — may be soon be available, offering traders a high-conviction bet on the best alternative hedge, in one fell swoop.

A potential regulatory shift in favor of the ETF industry is expected to shake up the business models of Wall Street brokers by as much as $30 billion a year in fees.

In this week’s Drill Down on Bloomberg’s Trillions podcast, regulator Hester Peirce, known to many in the digital-asset industry as “Crypto Mom,” has a message for her fans: be more patient.

Peirce urged those waiting for another round of approvals on crypto-related exchange-traded products — or for broader regulatory clarity — to realize that, as she put it, “there’s a lot going on.”

Hester Peirce, commissioner at the US Securities and Exchange Commission (SEC). Photographer: Kent Nishimura/Bloomberg

“People have to be patient,” Peirce said. “We have some ongoing litigation we have that we’re trying to work through. We have lots of other considerations that we’re thinking about and so, you know, just be patient then on some of these filings.”

Cinthia Murphy of TMX VettaFi and Anthony Scaramucci of Skybridge Capital join Bloomberg Television’s ETF IQ next week at noon. Watch on Bloomberg Television’s ETF IQ, on the Bloomberg Terminal at TV <GO> and on YouTube.