ETF trading volume soars to a new all-time daily record amid turbulent January

ETF trading volume soars to a new all-time daily record amid turbulent January
8 months ago
3 mins read

Exchange-traded funds (ETFs) have continued their impressive recent run, with traded shares hitting an all-time high value. 

On Monday, January 24, 2022, ETFs recorded a daily record high, with traded shares standing at $480 billion, almost four times higher than the average figure, data provided by Bloomberg’s senior ETF analyst Eric Balchunas.

Elsewhere, between Friday and Monday, ETFs cumulatively traded shares worth $850 billion, led by 99 products that also attained an all-time high. 

ETF trading volume daily turnover. Source: Bloomberg

Worth mentioning is that ETF trading volumes last peaked in March 2020, a period when the stock market plunged in reaction to the economic impact of the coronavirus pandemic. 

Interestingly, the ETF trading volume has spiked when the stock market is under turmoil and uncertainty over concerns regarding the Federal Reserve tapering. The projected interest rate hikes are forcing investors to opt for products that will cushion them. 

The uncertainty in the market is highlighted by Tuesday, January 25, tech stocks plunge in the premarket. The drop is led by big players including Tesla (NASDAQ: TSLA), Apple (NASDAQ: AAPL), and Nvidia (NASDAQ: NVDA).

Historically, transactions in instruments like ETFs tend to surge when investors respond to broad economic policy trends.

Possible drivers for ETF driving volume 

This indicates that investors are likely focusing on more liquid investment instruments to navigate the market. Notably, the interest in ETFs has been spurred by a growing number of investors attracted by the industry’s passive products.

In recent months, ETFs have recorded significant growth, with investors betting on the transparency aspect that comes with a clear holdings breakdown. 

Additionally, with the markets facing uncertainty, the ETFs’ efficiency also acts as a point of interest for many investors alongside the lower transaction costs relative to the underlying basket of securities.

While the spike in ETF volume appears unbothered by the general stock market happenings, the focus is on policymakers who are gearing up towards enacting new monetary guidelines and how they will impact the general market.

Despite the cloud of uncertainty, there might be a silver lining for the stock market. According to Finbold’s previous report, stocks could potentially be preparing for a rebound as fundamentals remain near constant. 

Notably, the focus is on possible deflation of the geopolitical tensions pitting Russia and Ukraine. Worth mentioning is that uncertainty is creeping up in the markets with the looming Russian invasion of Ukraine.

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Justinas Baltrusaitis

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.