Once again, ETF inflows find themselves at a record high, with highlights in various areas. Joining the “ETF Report” with hosts Alexis Christoforous and Karina Mitchell, ETF Trends’ CEO Tom Lydon spoke about the top ten best performing ETFs year-to-date.
To be more specific, the talk of the moment is the COP26-related ETFs out of Glasgow and their focus on climate change. As far as how the money is piling into those related ETFs, Lydon explains how these areas have continued to be hot, but in the last month, a few top solar ETFs from Invesco, Invesco Solar ETF (TAN) and Invesco Global Clean Energy ETF (PBD), are up over 24% and 20% within the last month.
Lydon states, “There’s a strong demand that there’s going to be some bit to the messaging being seen in Glasgow, and with that, we’ve seen these stocks rise considerably in the last few weeks.”
Shifting gears to the interest in crypto ETFs, Lydon notes how the mainstream embrace of the recently released Bitcoin futures ETFs, BITO and BTF, has allowed the average investor that doesn’t necessarily understand the nuances of the sector to be more involved.
“The big question, at this point, is will the SEC see the future that they can have a physically-backed ETF,” Lydon adds. It’s the big question in regards to what to expect in 2022.
Looking Up At Energy And Commodities
Looking over to energy and how it’s been one of the best performing sectors for ETFs year-to-date, Lydon brings up the First Trust Natural Gas ETF (FCG), which is up tremendously. That speaks to how, getting into the winter months, there’s more demand for natural gas worldwide, which will make for a sustainable result in the market for the next few months.
That said, there is concern about the price per oil barrel. Many are talking about seeing a $100 barrel by the first of the year. With ETFs being the way they can be diversified, it means applying various concepts within certain funds to accommodate significant changes to some of the holdings.
From there, Lydon notes how commodities have been very popular. One fund to look at is the Direxion Commodity ETF (COM), a combination of 13 different commodities. Keeping that in mind, with inflation thought to be here for a while, the price of commodities will continue to rise, which corresponds with the current state of the sector.
As far as impending rate hikes regarding portfolios, Lydon explains how the bond markets will be impacted. People with traditional 60/40 portfolios are switching to growth or alternative income strategies to deal with the changes.
“What we’re seeing in the fixed income side is how there’s a fraction of money going into bond ETFs. Most of that money is going into short duration active or alternative income strategies,” Lydon adds. These areas are making up for the low yield environment now and what rising interest rates can do to bonds.
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