The Exchange ETF conference just wrapped up in Florida – and the ETF business is sizzling – much like all of us were down in Miami Beach. The good news – business is booming – with more than $7 trillion in assets under management and still on the road to rapid expansion this year. But the 2,000+ financial advisors in attendance were wringing their hands about what to tell clients when it comes to navigating the choppy market terrain – particularly when it comes to bond ETFs.
Key takeaways:
Red flags. What's keeping advisors up at night? Inflation is still the number one concern, followed by geopolitical risk and the potential for a prolonged economic slowdown.
Bond fund blues. Bond funds have sunken to new lows – and that includes the biggest ones out there, like the Vanguard Total Bond Market ETF (BND) and the PIMCO Active Bond ETF (BOND). Plenty of talk about the fraying of the typical 60/40 portfolio allocation, as 70/30 is starting to look like the new 60/40 (or maybe 60/30/10 in cash if you're worried about a possible recession.)
Crypto ETF conundrum. The bitcoin conference just ended last week, and there's a growing chorus of calls for a spot bitcoin ETF this year. Grayscale Investments CEO Michael Sonnenshein has put an application out in front of the SEC to convert his Grayscale Bitcoin Trust (GBTC) into an ETF – and the SEC has until early July to respond. Of course, they've so far rejected all pureplay bitcoin ETF proposals, but Sonnenshein says he is ready to sue them if they do not approve one this time around.
And finally, some notable nuggets from two of our interviews making the most waves this week.
DoubleLine Capital CEO Jeffrey Gundlach reiterated his stance that the Fed has fallen way behind the curve, (saying perhaps the 2-year Treasury note should replace the Fed) and he believes we are nearing peak inflation but says "it's going to be sticky" and "frustratingly elevated" for some time. He recommends shorting cyclical stocks and buying defensive names like consumer staples and warns the Nasdaq will continue to underperform the S&P 500 throughout 2022.
ARK Invest's Cathie Wood had some choice words for Morningstar, which downgraded her flagship ARK Innovation ETF (ARKK) last week in a scathing review. She said it's never wise to short innovation, Morningstar doesn't understand what ARK does – that the fundamentals of her vision are still intact, and when it comes to valuing disruptive innovation, the "private markets get it" much better than the stock market does. ARKK's down roughly 37% YTD, but she's focused on the five-year time horizon.
As for Twitter, she said she lowered her stake in the company following recent drama this year and said "we know there is now going to be a lot of management distraction, maybe board distraction, with or without Elon Musk." She also called for more drama still ahead!
On paring down her holdings, Wood said ARK always concentrates their portfolios during risk-off periods, and more concentration doesn't always necessarily mean more risk.
Before we let you head off into the long weekend, don't forget to join us on ETF Edge at 1 PM on Monday when we'll have Dave Mazza, Head of Product at Direxion and Will Rhind, GraniteShares CEO on to discuss the advent of single-stock ETFs. Investors will be able to do leveraged and inverse plays on big tech stocks like Amazon, Alphabet, Apple, Coinbase, Tesla and other widely held names. That means investors will be able to easily go long and short these name. But should investors be wary of such products? What does it all mean for your money? Join us Monday and find out.
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