ETF investors are ‘trying to get back to core set of exposures’ amid surging inflows, expert says

VettaFi Financial Futurist Dave Nadig joins Yahoo Finance Live to discuss the surge of net ETF inflows in the month of October and why many are focused on tech and bitcoin ETFs.

Video transcript

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- Net inflows to ETFs surging past $111 billion globally in October. That is triple what we saw in September and the highest reading since March. That data according to BlackRock. VettaFi financial futurist Dave Nadig back with this part of our ETFs segment brought to you by Invesco QQQ.

Dave, good to see you. Those are some eye popping numbers we just put on the screen for you. What do they tell you?

DAVE NADIG: Well, if you look under the hood, it's definitely a risk-on-ish moment. So if you look at where that money has actually been going, a big chunk of it went into US equities. Over $50 billion flowed in just in the last month, just in October.

And if you look where it went inside that, it gets a little more complicated. We're not seeing a ton of money flow into the riskiest of risky ETFs, but we are seeing more interest in technology than we've seen in a long time. And also continued interest in things like dividend strategies, Dow strategies. We haven't talked about the Dow in a long time. There is a lot of interest in those, sort of, core equity positions.

Meanwhile, on the bond side of the equation, it's very much a risk-on play. We saw the largest inflows into junk bonds, into high-yield bonds that we've seen frankly in ages. Clearly, investors are trying to get back to that core set of exposures, maybe trying to call some bottoms.

RACHELLE AKUFFO: So Dave, given the influence that we're seeing in tech, is that surprising given the sell off, the tough year that tech has had so far?

DAVE NADIG: Well, if you talk to advisors who are trying to be tactical, what you'll hear from them is they do look for bottoms. I mean, you were just talking about some of these stocks that are down 50%, 60%, 70% on the year. Bitcoin, one of the biggest launches last year, BITO, it's down over 70% in its trailing 12 months. At some point, people look back at these assets and try to figure out where there's some fundamental value. Whether that's in Bitcoin, or Meta, or Netflix, people are going to eventually try to call the bottoms on these things.

Now, I think that's a bit of a tricky proposition in days like today where we're swinging back and forth 2% here and there. Trying to pick an actual bottom, I think, is a bit of a fool's game. I'm more of a long-term investor.

But we're definitely seeing that interest. People do want to be invested in what they think is not going to be the worst economy we've ever seen. At some point, all of these stocks end up being buys again.

DAVE BRIGGS: Yeah. And you mentioned Bitcoin, and given the "Wall Street Journal" reporting now that Binance made bail on the FTX deal after looking under the hood, is anyone going to get anywhere near Bitcoin in terms of the ETFs? And lastly, can we ask you about the news cycle? Any impact from last night's midterms?

DAVE NADIG: Yeah, so on the Bitcoin ETF, you know, where is the Bitcoin ETF? We've been talking about that for years now. Things are moving on a pace there.

I don't think the market activity we're seeing around some of these centralized exchanges and then the follow-on effect that we've seen in Bitcoin itself now trading, last I looked, under 17,000, that obviously isn't helpful to the cause of folks trying to make crypto a really investable asset class. But at the same time, it doesn't actually put any roadblocks in any regulatory hurdles in getting those things approved. I do think we'll get there eventually.

It's still probably another year off if not further. We do need comprehensive crypto regulation. And maybe some of what we're seeing with the centralized exchanges will help regulators realize that a really solid regulatory framework would make a lot of this easier.

In terms of the election, look, it's clear that we're sort of in the middle right now. We still don't quite know what the end result is going to be. If you look at the market activity, it's tough for me to look at the market being down 1% or 2% to be a direct reaction to what we've seen in the election cycle so far.

I think the business cycle is what matters here much more. The stocks that you all have been talking about, those are moving not because somebody may or may not be getting elected. They're moving because those businesses are fundamentally changing.

RACHELLE AKUFFO: Certainly a lot for investors to digest no matter where you look. A big thank you to Dave Nadig, VettaFi financial futurist. Have a great afternoon.