The strong dollar has jumped 7% YTD. However, while Microsoft has concerns, Vice Chairman at VettaFi, Tom Lydon, is aware that investors can still be making money on the surging greenback. He expressed these thoughts and more during the “Claman Countdown” with Liz Claman on Fox Business.
As Lydon explains, investors can put their money toward almost anything with ETFs, including currencies. He continues, “We’ve seen, during times of uncertainty, that most investors tend to move toward currencies that they have more confidence in, and the dollar is right up there on the top of the list.”
Many have moved money into cash or short-duration in a way that may overcome some of these inflationary concerns. With the CPI over 8%, people can actually invest in the dollar if there continues to be volatility through the Invesco DB US Dollar Index Bullish Fund (UUP). It’s been up 6.5% this year and over 13% over the last year. UUP has proven to be a great way to diversify the portfolio when concerned about inflation and safety.
Looking at what’s putting this money in motion, markets below the 200-day average are showing signs of stability. Also, after 30 years of declining interest rates, bond markets are under pressure. Plus, inflation and commodities trends have been the strongest in 40 years.
How Is It Flowin’
In terms of YTD ETF flows, led by the SPDR S&P 500 ETF (SPY), the iShares Core S&P 500 ETF (IVV), and the Vanguard S&P 500 (VOO), the US Fixed Income ETF flows were negative in Q1, but investors are seeing a less hawkish Fed. The threat of a greater than expected rise in interest rates is less of a concern as most think the Fed worries more about pushing the country into a recession than the need to battle inflation.
Additionally, more money went into commodity ETFs than US fixed income ETFs in Q1. The FAANG stocks, along with Microsoft and Tesla, account for 25% of the S&P 500 weighting, but all have underperformed the index YTD.
As far as other funds to watch go, Cathy Wood’s Ark Innovation ETF (ARKK) continues to attract assets as investors look to take advantage of the massive decline in innovative technology stocks in the last year. While having paired back a lot, it’s up 19% in the last four weeks. Additionally, the China-focused KraneShares China Internet ETF (KWEB) is up 30% during the same period.
For more news, information, and strategy, visit VettaFi.com.