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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