hello in this week’s etf wrap you’ll get a look at etf flows in 2022’s bear market in stocks and bonds and a view of how some assets have fared as investors look ahead to 2023 please send feedback and tips to christineidzelismarketwatchcom you can also follow me on twitter at cidzelis and find me on linkedin this year’s bear market isn’t keeping the flow of capital into exchangetraded funds from rising to historically high levels even if inflows have slumped from 2021 at the end of november uslisted etfs had attracted 568 billion in 2022 and were on track for annual inflows of 622 billion based on average december flows over the past decade according to a state street global advisors report that would be the second time flows exceeded 600 billion in a calendar year with 2021 being the first instance the report says “the bear market has accelerated the great migration out of mutual funds into etfs” matthew bartolini head of spdr americas research at state street global advisors said by phone for many investors it’s been “a catalyst to act” because they’re “sitting on losses” or returns small enough to be “palatable” when hit with capital gains taxes in making the switch to etfs which tend to be cheaper and more tax efficient than mutual funds bartolini explained the etf industry had around 66 trillion of assets under management at the end of november according to bartolini that’s down from 73 trillion last year but still above levels seen in recent years for example uslisted etf assets have swelled from 34 trillion in 2017 and so far this year remain up from 55 trillion in 2020 emailed data provided by bartolini show the pace of monthly etf inflows has recently picked up the state street report says the 174 billion of inflows seen on a rolling threemonth basis through november rank “in the 91st percentile historically” and among the top 20 ever for such a rolling span of time bartolini who authored the state street report wrote that bond etfs were “one of the bigger drivers of this accelerated pace” by phone he said that investors showed interest in highyield corporate bonds in a “giveback” of assets over the last two months after earlier outflows but he also said it’s hard to get too enthusiastic about highyield debt or so called junk bonds for 2023 due to concerns over a potentially looming recession highyield is more vulnerable to default than investmentgrade bonds bartolini said he prefers shortduration investmentgrade corporate bonds for 2023 pointing to maturities of one to three years and yields of around 55 government debt pulled in the most within fixedincome flows in the three months through november the state street report shows shortterm bonds attracted nearly threequarters of the capital flowing into government debt during that period read where blackrock sees ‘tremendous’ market opportunities for etf investors in 2023 after damage to stocks bonds still equity etfs have dominated inflows this year through november raking in more than twice the assets flowing into fixed income according to state street meanwhile commodity etfs have suffered yeartodate outflows the report shows within equities “the bias is toward defensiveness” bartolini wrote with defensive sectors in november posting inflows for a record 13 straight months state street found that healthcare and consumer staples were “the main areas of interest” within defensive sectors last month the report shows that etfs focused on those two areas saw by far the biggest sector inflows in november meanwhile dividend funds continued to attract investors last month with etfs focused on dividendpaying stocks seeing a 27th straight month of inflows according to the report “dividend strategies have this unique combination of value and quality” which may work well in an environment with concerns over corporate earnings bartolini said by phone but dividend stocks aren’t “100 defensive” he said “there’s a decent amount of cyclical exposure” he added saying the strategy might also benefit in “a cyclical surprise to the upside” shares of the ishares select dividend etf dvy were down just 05 this year through wednesday with a total return of 21 according to factset data by contrast the spdr sp 500 etf spy trust lost 163 over the same period on a total return basis within equities etfs focused on us stocks have seen the most interest from investors this year but state street has seen recent demand for other regions according to bartolini in november “investors started to look overseas” potentially amid concern that the us market appears “priced for perfection” from a valuation perspective he said by phone shares of the xtrackers harvest csi 300 china ashares etf ashr have plunged about 26 this year through wednesday while the ishares msci emerging markets etf eem dropped almost 21 factset data show the ishares msci eafe etf efa  which tracks an index of developedmarket stocks in europe australia and the far east was down around 15 over the same period next year bartolini said he expects uslisted etfs could see around 500 billion to 600 billion of inflows despite looming recession concerns as usual here’s your look at the top and bottomperforming etfs over the past week through wednesday according to factset data   tidal financial group said dec 6 that it launched the senior secured credit opportunities etf secd an actively managed fund that invests in senior secured loans and secured bonds tidal an etf investment and technology business said the new fund is managed by gateway credit partners   dimensional fund advisors announced dec 7 the listing of the dimensional us large cap value etf dflv and dimensional global real estate etf dfgr on the nyse arca   etf tracking sp 500 sees highest number of sharp moves down this year since 2008 bespoke finds marketwatch   china etfs fall despite surging stocks in hong kong after reports chinese covid restrictions are easing marketwatch   hundreds of new etfs debuted this year even as markets suffered bloomberg   the american age of etfs financial times