On this week’s “ETF Report” hosted on Yahoo Finance, ETF Trends’ Head of Research, Todd Rosenbluth, came into the segment to discuss which ETFs to look out for, based on where the flows have been headed lately.
As far as how Rosenbluth has seen demand for ETFs versus single stocks trending broadly over the course of 2022 so far, he notes how, based on surveys with advisors, they have been looking toward dividend strategies to combat the effects of inflation while still gaining income.
“We’re now starting to see that data coming in from a flows perspective,” Rosenbluth adds. “Dividend ETFs have been particularly popular in recent weeks as a way of getting equity exposure, of course, but also getting that steady stream of income in the face of both rising inflation and the Fed.”
When it comes to whether all of these dividend funds have been treated equally, he explains that there’s been a mixture of growth-oriented strategies such as the more value-oriented Vanguard Dividend Appreciation ETF (VIG) and the more growth-focused iShares Select Dividend ETF (DVY).
.@etftrends Head of Research @ToddRosenbluth discusses ETF trends in 2022 amid inflation and high oil prices: pic.twitter.com/OcPGfjJcBu
— Yahoo Finance (@YahooFinance) March 23, 2022
Rosenbluth adds, “We are seeing more of a variety of approaches, but those ETFs are going to have to perform quite differently, as DVY has been, by far, the much stronger of those two products this year because of its utility exposure and energy exposure, which have been doing very well. Not all dividend ETFs will perform the same, even though they have ‘dividend’ within the name of the ETF.”
With notes how the correlation between the S&P 500 energy sector and the broader index turned negative for the first time since 2001, Rosenbluth’s thoughts regarding investors’ rotation into energy reflect the relatively small scale nature of what’s going on. The energy sector is a relatively small piece of the broader S&P 500, roughly 3% (lower a year ago). With that in mind, investors with overweighted exposure to energy have been rewarded over time because it’s such a small part of the portfolio.
There is a continued interest in energy equity products and broader commodity ETFs that invest in energy, gold, or a broadly diversified basket, as investors are looking to protect themselves against the risk of rising inflation.
As far as those that would benefit from the Fed’s rate-hiking environment, Rosenbluth feels there will still be more rate-hikes on the way in 2022 and 2023. An ETF such as the JP Morgan Ultra Short Bond ETF (JPST) has been a good place to park assets, earn some income, and earn the benefits of active management combined with it.
Looking over to thematic investing, following the rise of the ARK Innovation ETF (ARKK), Rosenbluth notes how while ARKK saw some performance challenges, money has continued to move in through 2022. A range of other active/thematic ETFs have similarly performed well, including GINN, DTEC, and others.
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