Investors just pulled $7.6 billion out of U.S. equity ETFs. That’s a big number, and it’s saying something loud and clear: people are getting nervous. With President Trump’s latest tariff policy moves and the Middle East situation getting out of control, investors are stepping back from the usual equity names and heading toward safer bets.
What’s interesting is that markets were nearing all-time highs. So, you’d think investor confidence would be rising too. But instead, they’re trimming exposure.
According to ETF.com, even with the return of risk-on trading earlier this year, the mood has definitely shifted.
So, What’s The ETF Alternative?
Matt Kaufman from Calamos Investments broke it down. While equity ETFs are seeing outflows, money is flowing into buffered and derivative income funds. In fact, defined outcome ETFs pulled in $7 billion.
Even more eye-catching, income-focused derivative strategies got a massive $22 billion. These are designed to provide income without relying on traditional interest rates or bonds.
So yes, investors still want growth, but they want it with a safety net. One example is CANQ, which mixes Nasdaq 100 upside with a bond floor for protection. People are still into big tech, but they want guardrails.
Fixed Income ETFs Are Back
Fixed income ETFs are also gaining ground again. Christian Hoffman from Thornburg says it’s because people now get both yield and safety. For years, fixed income wasn’t that exciting. But with today’s rates, it actually looks good again.
ETFs like CPSL that offer 100% protection are seeing more love, especially from retirees and income-seeking investors.
And it’s not just about bonds. Bitcoin is sliding into mainstream portfolios, too. Kaufman said over 500 advisors recently showed interest in crypto allocations, something that would’ve been unthinkable six months ago.
So what happens next?
ETF flows usually tell us what’s coming. With market volatility and global tensions rising, investors are clearly opting for caution. The back half of 2025 could see even more flows into structured ETFs, fixed income, and digital assets like Bitcoin.
It’s not about abandoning growth, it’s about staying in the game with some protection.
