ETFs, born from 1987 market crash, are so far making 2020 less awful

Financial markets have been terrifying over the past few weeks. But the losses and volatility seen recently don’t come close to Black Monday — October 19, 1987 — when the Dow Jones Industrial Average plunged 22.6% in one day.

As a reminder, ETFs allow investors to express a view on something: large-cap stocks will go up in price, say, or securities from a particular country might not be a good buy right after a populist wins a primary. But unlike mutual fund managers, who buy stocks or bonds or options or other assets, ETFs track — but don’t necessarily trade — those securities.

To be sure, through the most recent turmoil there have been some well-publicized dislocations of pricing in ETFs. As MarketWatch reported Tuesday, a large corporate bond ETF closed one recent trading day a bit lower than the value of the securities that underpin the fund. Barron’s has also written recently about such disconnects in other bond funds.

“ “This problem isn’t emanating out of ETFs. This is a run on the bank amid a collapse in confidence.” ”

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