BlackRock: ETF pessimists proved wrong in February

Since the ETF market really started gaining traction, critics have voiced fears that during volatile market periods, the instruments could disrupt normal market function. In an analysis of ETF behaviour during the critical days of early February, BlackRock has concluded that they in fact played a calming role in stormy weather.

In the first few days of February, the rallying stock market collided with a spike in bond yields, as the fixed-income market priced in the threat of inflation. Investors were suddenly worried that the economy -- boosted by huge tax cuts -- could overheat, forcing the Federal Reserve to raise interest rates. Markets that were previously very calm rapidly became a rollercoaster ride.

How did ETFs behave in this volatility? Did they steepen the price falls? Were they unable to hold their ground, their spreads widening? In its recent analysis, BlackRock answers these questions with: "Really well", "no", and "no".

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