Flow & Tell with iShares | Mar 2022


March marked the end of a volatile quarter that brought conflict in Europe, an equity market correction, a sharp rise in interest rates, and defensive portfolio tilts across asset classes. Retail returned in March to buy the dip, likely sparking the stock rally off the lows. Investors shifted focus from European equities to U.S. ones, and sector flows showed a shift away from cyclicals.


Retail investors reengage.

Despite geopolitical risks and rate volatility, retail investors were more active in March while institutional investors lacked conviction.

Moving from Europe to the U.S.

Both U.S. and international investors pulled back in their European exposures as the Russia/Ukraine crisis continues.

Adding defensive positions amid slowdown risks.

Sector specific and commodity flows get defensive as slowdown concerns plague the market.


March ETF heat map

March ETF flows compared with index performance

Chart showing March ETF flows heat map

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of April 01, 2022. Flows normalized by AUM as of February 28, 2022. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance is measured by the following indices: U.S. Treasury: ICE 10-Year U.S. Treasury Index; EM Debt: DB Emerging Markets Debt USD Index; HY Credit: iBoxx USD High Yield Index; Gold: ICE LBMA Gold Index; Commodities: S&P GSCI Index; DM ex-U.S.: MSCI World ex-U.S. Index; Financials: S&P 500 Financials GICS Level 1 Index; Information Technology: S&P 500 Information Technology GICS Level 1 Index; Health Care: S&P 500 Health Care GICS Level 1 Index; Consumer Discretionary: S&P 500 Consumer Discretionary GICS Level 1 Index; Energy: S&P 500 Energy GICS Level 1 Index; Real Estate: S&P 500 GICS Level 1 Index; Materials: S&P 500 Materials GICS Level 1 Index; Utilities: S&P 500 Utilities GICS Level 1 Index.


After a quiet start to the year, retail investors roared back into the equity market in March. While institutional investors have remained focused on macroeconomic volatility and are positioned increasingly defensively as a result, retail sentiment is bullish on traditional growth sectors of the U.S. market.1 Focusing primarily on tech, this segment of investors has been very active in single stock names and derivative markets — pushing households to the largest share total equity ownership in 20 years at 39%.2 

Notably absent in January’s selloff, equity trading data shows that while institutional investors took a step back in March, retail investors were more than willing to buy the dip after the S&P 500 entered correction territory in mid-March. This likely explains at least part of the market rally into the back half of the month. Although we expect higher volatility to be the norm as the Federal Reserve hikes interest rates and the Russia/Ukraine crisis continues, whether households are willing to keep stocking up on stocks may determine the magnitude of future downturns.

The return of retail

Chart showing retail trading volumes as % of total equity volumes

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of March 31, 2022. Retail volumes represented by TRF tape (MVOLUDT Index). Total equity volumes represented by U.S. Consolidated tape (MVOLUSE Index).


As the Russia/Ukraine crisis drags on, investors have retreated from European exposures and reallocated towards U.S. equity markets. Heightened geopolitical risk falls disproportionately on Eurozone assets. 40% of Europe’s natural gas is sourced from Russia, and nearly a third of its oil, which affects business operations as well as consumer behavior and sentiment.3 As a net energy exporter, however, the U.S. remains more insulated from the immediate consequences of the geopolitical volatility (outside of higher oil prices). 

As a result, ETF flows have heavily favored U.S. equity exposures at the expense of European assets. Since the beginning of the Russian invasion of Ukraine, flows into globally listed ETFs with European exposure have reversed. Flows into Europe ETFs closed the quarter up just 1.1% on the year after $3.6bn of outflows since February 24th. Flows into the U.S., in contrast, have accelerated, pointing to a broader investor rotation back to the U.S. Year-to-date, global ETFs with exposure to U.S. equities have gathered $22.5bn and grown by 3.6%.4 This matches a broader trend of risk reduction across investor types and asset classes, as flows show a move up in quality.

Global investors taking down European risk

Chart showing U.S. and Europe focused ETFs (Jan - Mar 2022)

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of March 31, 2022. Flows normalized by AUM as of December 31, 2021. ETF groupings determined by Markit, BlackRock. ETF universe representative of globally domiciled ETFs.


Persistently high inflation, a Federal Reserve intent on raising rates, conflict in Eastern Europe, and surging commodity prices have understandably caused investors to rethink risk in their portfolios. Unsurprisingly, ETF flows show defensive positioning and a retreat from more cyclical exposures.

Sector flows tell the story. Health Care, which typically has strong pricing power and the ability to pass on higher costs to consumers, saw inflows in March with sector ETFs adding $2bn. The Fed raising rates did not prevent investors from pivoting to growth: tech sector ETFs added $2.2bn in March after just $419mm in February. Technology companies, particularly the mega caps, tend to have strong balance sheets and low leverage — characteristics that add resilience in volatile markets. Gold, long viewed as a safe haven asset, saw consistent inflows throughout March adding $5.9bn. But Financials, a start of the year favorite, shed $3.38bn as cyclicals fell out of favor.

Defensive stance

Chart showing key sector ETF flows

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of March 31, 2022. ETF groupings determined by BlackRock, Markit.




Gargi Pal Chaudhuri

Gargi Pal Chaudhuri

Head of iShares Investment Strategy Americas at BlackRock

Kristy Akullian

Investment Strategist


Nick Morales

Investment Strategist