As it has been an important topic throughout the year, inflation is still on the minds of many. Joining the “ETF Report” with host Alexis Christoforous on Yahoo Finance, ETF Trends’ CIO and director of research Dave Nadig discusses how ETF investors are coming at these rising rates, whether they are using certain funds as a hedge, and if any profitable opportunities are coming from it.
For Nadig, it’s clear that investors and advisors are very much focused on inflation. October was a massive month for inflows into TIPs products, with $5.7 billion making for the year’s record.
With that in mind, as Nadig states, “By the time you see something like big flows into TIPs, it’s probably a little bit too late,” meaning that inflation has arrived and it’s a little late to be profitable from it. As a result, there’s been a lot of focus on commodities. These alternative ways to get exposure to assets that may rally with inflation do allow for some interesting ETF options.
There’s the Invesco Optimum Yield Fund (PDBC), which has no random tax forms at the end of the year. It’s more of an optimized basket of broad commodities exposure that’s heavy on energy but has been doing very well.
Nadig adds, “A lot of investors do think that we are headed for some sort of new commodities supercycle.” So, for investors looking to get less energy-intensive, there’s also WisdomTree, which just added bitcoin futures into their big commodity slot. That fund is the WisdomTree Enhanced Commodity Strategy ETF (GCC), which provides that small bitcoin factor and a more diversified basket to pull back from the energy sector.
“That would be my lean right now,” Nadig explains. “Look at commodities and maybe look at GCC.”
“There’s no questions investors and advisors are really focused on inflation,” @ETFTrends CIO @DaveNadig says. “What we’ve seen is a lot of focus on commodities, alternative ways to get exposure to assets that may rally with inflation.” https://t.co/Jb7k9tf4PH pic.twitter.com/pYCvoOR6Cb
— Yahoo Finance (@YahooFinance) November 10, 2021
Where in the World
Switching gears to holiday travel, it’s important to keep track of the opportunities for investors based on current travel trends. Nadig believes, in theory, that this is a solid idea to focus on. With things almost back to a pre-pandemic normal regarding this industry, there’s reason to expect a real boon in broad travel.
With that in mind, were investors to focus on airline travel, Nadig points out that the U.S. Global Jets ETF (JETS) is the easiest way to go. Now, it hasn’t been doing particularly well recently, with airlines currently under pressure for various reasons. However, with things rolling through the system and being priced into airlines, there’s a good chance for a turnaround as the holidays get closer.
Additionally, JETS is a good way to also get into other aspects of travel. There’s the maintenance, services, etc. That said, for investors looking to get very aggressive, Nadig also notes the Direxion Daily Travel & Vacation Bull 2X Shares ETF (OOTO), aka Out of the Office. The basket underneath this fund is hotels, leisure companies like Disney, and airlines.
“If you really want to make a bet on the next eight weeks through the travel season, I think that would be the way to do it,” Nadig states. That said, Nadig does want everyone to be cautious, since it is levered, and if it goes wrong, investors go down twice as fast.
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