Yahoo Finance: Dave Nadig Talks Retail ETFs, Stagflation & Travel

Retail has been the topic of the week on Wall Street, though there have been some disappointing sales numbers coming in. Joining the “ETF Report” with host Alexis Christoforous on Yahoo Finance, ETF Trends’ CIO and Director of Research Dave Nadig discusses his thoughts concerning the big box retailers, as well as the possibility of what’s become known as stagflation, and travel stocks, given the continuing nature of the pandemic.

To back up to retail, with shifts taking place from shopping online to people heading back to brick and mortar stores, Nadig has some thoughts on what seems to be taking place as well as retail-focused ETFs. As he explains, people choose what they have a stronger belief in as far as how to shop. However, while there may be some increase in in-store shopping, that may fade as the fall approaches, and people become more cost-conscious.

“I’m a little bit skeptical of this brick and mortar resurgence,” Nadig adds.

In terms of ETFs, Nadig does point out the ProShares Long Online Short Stores Fund (CLIX), which helps provide the best of both worlds. It goes short on the big box retailers relying on in-store sales, and it goes long for those who put most of their revenue toward the online space. The means being about half invested overall, making for an interesting way for investors to make a play on strong retail while keeping invested the way things have been going.

Ready For Stagflation? 

Switching gears to not inflation but what’s actually been referred to as possible stagflation, where a situation of slow economic growth but high unemployment and rising prices, Nadig has some suggestions on how to defend against this. First, he points out how it comes from the rotation into value that fell off in the second quarter of 2021. 

As Nadig points out, “Traditionally when you end up with these rolling-over-growth but continued inflation environments, what you want to be in is defensive quality. Companies that have really strong cash flows and strong earnings aren’t really reliant on go-go growth to make up for lost sales elsewhere.”

Looking to funds to recommend, Nadig highlights the American Century STOXX US Quality Value ETF (VLAQ), a combination of a value and quality strategy. It can be seen as playing pure defense while staying invested in familiar, stable companies. It may lead to more traditional plays; it allows for cash giants to stay on board as well.

Nadig also points out the FlexShares Global Quality Real Estate ETF (GQRE), as real estate is an interesting category for an inflationary environment. This fund adds a quality value and momentum screen on its global reek holdings to prevent investors from getting stuck in a value trap.

Crypto Concern

In the absence of an actual fund, Nadig points out the concept of investing in the actual companies that are driving this digital transformation. Speaking of which, he highlights the VanEck Digital Transformation ETF (DAPP), which invests in companies such as Coinbase, Square, and similar places that involve crypto in some form.

Nadig adds, “I do think we’re going to get a futures-based bitcoin ETF sometime this year. The SEC has made it clear that’s the direction they want the industry to go. But, I think an actual bitcoin ETF is probably now at least a year off.”

Travel Taking Off?

With airline and cruise stocks diving earlier this week, only to begin bouncing back currently, there is the threat of the delta variant to contend with in the coming weeks and months. Nadig believes he has reasons for being skeptical, but not the common ones others are tracking.

“I think most of our focus on travel has been on demand,” Nadig states. “People stopped traveling during the shutdown. They came back to travel as soon as they could. I don’t think that’s going to change.”

He continues, “I think a more interesting question is the supply side. In this case, the supply is labor. We’re sitting at all-time high quits, and we know the situation in terms of wages coming up – they’re having a hard time just getting folks to come back to work.”

This will lead to an increase in cost in various services and a limit in supply. This may put things in a bit of a crunch for the holiday travel season, where people want to travel more than they actually can.

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