On this week’s episode of ETF Prime, host Nate Geraci is joined by ETF Trends’ Lara Crigger, managing editor at ETF Trends and ETF Database, to discuss investors’ soaring interest in commodities. Later, Jon Maier, CIO of Global X, talked about current financial markets and thematic ETFs, followed by Gene Munster, co-founder of Loup Funds, who explains the index underlying the Loup Frontier Tech ETF (LOUP) and why it’s worth investing in.
The discussion opens with Crigger discussing the muted inflows for commodities in 2021 and how it was really two different commodities stories: broad commodity basket allocations that experienced inflows and gold that experienced outflows. It’s a trend that is reversing now, according to Crigger.
“Over the past few weeks, we’ve seen a tremendous upswell in traffic on our site about commodities, flows activities have been $15 billion roughly,” Crigger says of flows into commodities ETFs year-to-date. “We’re seeing those flows go not just into the broad-based commodities baskets ETFs like PDBC (the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF)… but also the gold ETFs GLD (the SPDR Gold Shares) and IAU (the iShares Gold Trust).”
Crigger finds it interesting that there is a lot of investment action happening both in the broad commodity spaces and the more targeted commodity strategies.
What is currently happening with wheat gives a good snapshot of the overall commodities story today; the Teucrium Wheat Fund (WEAT) as well as the Invesco DB Agriculture Fund (DBA), an ETF that invests in wheat and other commodities within agriculture, have seen spikes with the invasion of Ukraine by Russia. Crigger explains that Russia and Ukraine combined supply anywhere from a quarter to a full third of the wheat supply for the world.
“Now that wheat supply is effectively offline with no indication of when it’s going to come back online,” Crigger says. “We had inflation before sending prices higher; now that this war is on, wheat prices are just shooting through the roof.”
The influx of investors and cash flows has been so great that some futures commodity ETFs have had to temporarily suspend their new shares creation because they had surpassed the thresholds allowed by regulation. ETF prices tend to fluctuate more when their creation and redemption mechanism is suspended, and commodity futures ETFs such as WEAT saw shares trading at a premium once creation was suspended.
Crigger also discusses oil and trader action on both sides of the oil investment coin, the importance of investors understanding the funds they are investing in, and allocations to gold.
Thematic Investments and Disruption
Next was Jon Maier, CIO of Global X, who discussed the thematic approach and model portfolios that Global X offers. Speaking to the current situation in Ukraine and its implications for broader markets, he explains that while the U.S. doesn’t have many direct impacts, there are several indirect ones from its ties to European markets.
“Disruptions from this war and higher energy prices, even though they have pulled back a bit, could result significantly to dampen Europe’s growth outlook and weighing on corporate profits. Lowered demand from European consumers could really impact American profits,” Maier explains.
Closing out the podcast is Gene Munster, co-founder of Loup Funds, which focuses on disruptive technologies across public and private industries.
“When we think about where our violin concerto is, as one of our investors described it, what our sweet spot is, it’s making that identification… where the world is going, how our behavior is going to change and to really identify that, it’s best to know some of the smallest companies all the way up to the largest tech companies,” Munster says.
Loup doesn’t invest in the mega-cap companies but does identify thematic, disruptive growth happening across industries in categories such as AI, automation, and others. The Loup Frontier Tech ETF (LOUP) seeks to invest along a longer timeline.
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