Investors Shift to Bond and Gold ETFs as Recession Fears Mount

Safe-Haven ETFs Gain Momentum Amid Volatile Markets

As macroeconomic pressures intensify and fears of a recession grow, exchange-traded fund (ETF) flows in April 2025 indicate a major pivot among investors toward safer assets. Data from recent weeks shows a marked increase in investments into short-term U.S. government bond ETFs, widely viewed as low-risk havens during times of uncertainty.

Leading the charge are funds like the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), iShares 0-3 Month Treasury Bond ETF (SGOV), and iShares Short Treasury Bond ETF (SHV). These ETFs have collectively absorbed billions in inflows as investors prioritize capital preservation and liquidity. According to Reuters, this surge in demand reflects growing anxiety over equity market instability and the impact of U.S. trade policies on economic growth.

Another major winner is gold. The SPDR Gold Shares ETF (GLD), the largest gold-backed ETF in the world, has now surpassed $100 billion in assets under management. With the U.S. dollar weakening and inflation pressures on the rise, gold is regaining its appeal as a hedge against monetary erosion. Bank of America’s fund manager survey cited by Business Insider notes gold as the top investment pick in April—edging out stocks and real estate.

Equity ETFs Suffer as Risk Appetite Evaporates

While bond and commodity ETFs are enjoying renewed attention, equity ETFs are struggling under the weight of market volatility. Popular funds tracking broad U.S. market indices—such as Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF Trust (SPY), and iShares Core S&P 500 ETF (IVV)—have seen outflows increase as returns continue to deteriorate.

So far in 2025, the S&P 500 tracking ETFs are down approximately 4.9% year-to-date, with tech-heavy ETFs like Invesco QQQ Trust (QQQ) faring even worse, posting an 8.1% decline due to underperformance in major technology names. This reflects broader investor unease around growth projections and earnings forecasts, especially as interest rates remain elevated.

The volatility has also created pricing dislocations in major ETFs. In early April, SPY briefly traded at a significant premium to its net asset value (NAV)—a rare occurrence that underscores stress in the ETF pricing mechanisms. Bloomberg reported this event as part of a broader trend of ETF market inefficiencies under stress, particularly during intraday selloffs.

Outlook for ETF Markets in Q2 2025

As investors continue to digest geopolitical tensions, trade disruptions, and monetary policy shifts, ETF flows remain a barometer of investor sentiment. If economic data worsens or market volatility persists, expect continued rotation into defensive sectors and fixed-income ETFs, while riskier equity funds may face further pressure.

The coming weeks will be pivotal in determining whether the current ETF trends represent short-term hedging or a longer-term reallocation away from equities.