TD Ameritrade: Dave Nadig Talks BITO, JETS & The Equity Market

As stated, looking at equity markets, they are at or near all-time highs. For Nadig, as far as the breadth being seen in the flows to the ETFs, there’s currently a relentless bid market. Looking at the flows, overall, it’s been very risk-on, hitting around 4-to-1 for equity to fixed income, and that money is going into cheap beta. IVV, SPY, QQQ, VOO, and BTI, alone, pulled in $30 billion in October, which is around 25% of all equity flows. This has been going on month after month.

Nadig adds, “With so much activity in the market, I find it funny how we forget how much money is just going into these cheap, market cap, beta-weighted experiences. And yet, we do a lot of talking about how in the corners of the market, whether it’s crypto or stocks like that, the real market here is this relentless bid of incoming money into the market.”

Looking at the flows into the ETFs and the moves going on into cyclical and Bitcoin, the speculation on the upside suggests investors are buying based on their desire to be involved in what’s hip. As Nadig suggests, there’s so much volume that it’s clear a flood of retail money is coming in to go after the convex games with hopes to get out of the options market.

Focusing on Bitcoin, Nadig explains how the rise of the ProShares Bitcoin ETF (BITO) and the options market has been engendered under the hood. “It’s an entirely new market for exposures that frankly didn’t exist for most investors just a month ago.”

As far as whether the market supports the valuations and flows based on the arrival of these new crypto ETFs, Nadig believes it’s fair to say that pockets of the ETF industry will be fine, regardless. With that in mind, the hot money is clearly in the crypto sector. There’s high volatility, and it’s exciting.

“Any sector that’s small that gets any tiny bit of interest becomes turned into a mean stock overnight,” Nadig adds. “Any little catalyst just melts everything up.”

Looking at the upcoming holiday season, travel and leisure is another area that’s starting to pick up steam. International travel appears to be picking up. As a result, the U.S. Global Jets ETF (JETS) has been up over 11% this month.

As Nadig explains, looking at the numbers, the population is almost back to normal in many ways in this regard. When approaching a market like this, it comes down to all of the factors, along with the airlines. Manufacturing, service companies, etc., are all playing a role in showing how to capture that trade, and it’s very hard to be bearish in this sector currently.

Still, with all of the areas to keep track of, Nadig notes, “A big diversified basket is the absolutely the way I’d play a headline like the Thanksgiving travel season.”

Going further, when considering more of the retail side, Nadig notes how there haven’t been a lot of flows in this sector, outside of some notable performances from major funds like JETS. He states how he’s not sure if the trade is quite there yet on the whole. Those core allocations may still be dependent on the status of hospitality and leisure, with inflation factors playing a role.

“You look at where the biggest holes are in the labor market,” Nadig continues, “It’s right there. It’s right in that sector or in the manufacturing and transportation of goods. It’s tough.”