Stocks still reign in exchange-traded funds.

With the Federal Reserve delivering on its well-telegraphed rate cut, the risk-on rally continued in July as equity ETFs attracted over $20 billion of assets for the second consecutive month, according to the latest U.S. Listed Flash Flows report from State Street Global Advisors. Despite the headlines and the fact Equity ETFs have accumulated over $40 billion over the past two months, they are still 30% off last year’s pace, through the first seven months of the year.

“Looking past July’s market tranquility, the equities rally is not global,” said Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors. “Nor does it have deep market breadth in the US, evidenced by the sector performance as well as the ratio of the levels for the market-cap weighted S&P 500 relative to the equal weighted S&P 500 coming within a few points of hitting an all-time high. The latter indicates that large firms are at the helm of this rally ship, and rising tides are not lifting every boat (asset class).”

With such an environment, expect some volatility and that should affect future fund flows, Bartolini added.

“The slower pace of equity flows is another indication of a low participation rally, worth watching if markets turn volatile,” Bartolini said. “While equity ETFs are well off their pace from last year, the broader ETF market is not that far off (3% lower) as a result of the strength in fixed income flows. Bond ETF fund flows are running 42% higher than at this time last year. A lot of this strength is due to the record flows in June. For July, the flows were still strong, just more in line with the 36-month average of $9 billion a month.”

Commenting on equities on a global scale, SSGA noted the strength in equity flows was primarily driven by US- related exposures. US geographic-focused ETFs took in the most on both a notional dollar amount (+$21 billion) as well as on a percent of start-of-period assets for the month (+0.09%). With the US being the only major region to post positive returns in equities in July, as well as over the past three months, this is not surprise.

“Outside the US, there was little interest to express a risk-on view, with the exception of broad-based international developed exposures,” Bartolini said. “Single-country funds had outflows once again, and emerging markets had outflows for the second-straight month after being favored to start the year. As a result, EM’s three-month total has dipped negative.”

Away from equities, bond ETFs saw nearly $9 billion in fresh inflows during the month with investors favoring Aggregate, Mortgage-Backed and High Yield exposures. According to SSGA data, these segments attracted $2.8 billion, $1.7 billion and $1.4 billion,  respectively.

“With flows (fixed income) 42% higher than last year’s pace, there is a strong chance of surpassing the $100 billion mark for the second time in history – 2017 was the first time,” Bartolini said.  “But will 2019 break 2017’s record of $127 billion of inflows? Estimates are worth about as much as the paper they are written on, but using the trailing 12- and-36-month average fund flows for fixed income ETFs indicates that 2019 has a puncher’s chance.

One item of note, Bartolini said was the exodus from Healthcare ETFs.

“As a result of sizable geopolitical headline risk, given the amount of airtime this topic received during the Democratice debates, Health Care witnessed the greatest outflows of any sector in July, shedding $1.1 billion,” he said. “Conversely, Technology and Real Estate saw the most inflows during the month, attracting $779 million and $585 million, respectively.”

In the High-Yield sector, the last two months saw $4 billion in flows in June and $1.4 billion in July, marking the highest two-month total since 2012 and the third-highest ever.