Exchange traded funds have just seen their biggest quarter ever. With one day left in the quarter, ETFs had inflows of roughly $134 billion in the first quarter of 2016 — a record, according to FactSet. Inflows were strong in March as well, about $45 billion, despite concern over the Trump Agenda.



The influx of cash has brought assets under management for ETFs to $2.78 billion, according to FactSet, an increase of about 4.7 percent. ETFs track an index or a category of assets, but unlike mutual funds, they trade the same way a common stock does.

What happened? Investors wanted stocks, from all over the world. Nearly half the inflows were into U.S. equities, but international funds also had strong inflows, particularly into Europe and Emerging Markets.

ETF flows in the first quarter



U.S. Equity: $58.9 billion

International Equity: $37.6 billion

U.S. Fixed Income: $31.9 billion

Int'l fixed income: $3.9 billion

Other: $3 billion

Total: $134.8 billion Source: Factset

The big winners were:

Plain-vanilla S&P 500 index funds like SPDR S&P 500 ( ), iShares Cores S&P 500 ( IVV ), and Vanguard S&P 500 ( VWO Emerging market ETFs like iShares Cores Emerging Markets (IEMG) European ETFs, including iShares Cores EAFE (IEFA). This is not surprising: Germany, France and Italy are all closing out the quarter at multiyear highs.

The losers? There weren't many, but high-yield ETFs like SPDR High Yield ( ) and iShares High Yield ( ), both saw significant outflows, more than $1 billion apiece, which is about 10 percent and 6 percent of assets under management, respectively. They tend to move down with Energy.

HYG, by the way, will be 10 years old on April 4.

And, in what might be called the "anti-Trump" trade, Mexico and Japan also saw outflows.

What's going on? This is all about confidence, on three levels:

In the economy. Consumer confidence is at the highest level since 2000, though skeptics note that the "harder" economic numbers have not seen the jump this quarter that softer, "sentiment" indicators have seen.



In earnings. First-quarter earnings are tracking up roughly 10 percent, the best showing in nearly six years.



In the Trump Agenda of lower taxes, government spending on infrastructure, and fewer regulations.

The rest of the year will be about the tension between those three factors. Can these incredible flows continue? How much is due to the Trump Agenda, how much to the surge in low-cost ETF investing in general? It's clear the Trump Agenda can influence fund flows: the third week in March saw the first negative week since the election; that was the week the House failed on its Obamacare repeal bill.

Suppose a larger event closer to the market's beating heart occurred: What if tax relief comes off the table? Will we then see outflows from stock fund and "defensive" ETFs like Treasurys or gold? Neither have seen significant inflows this year, though gold stock ETFs have seen significant inflows.