ETFs: Investors looking for ‘economic response to inflation,' expert explains

Dave Nadig of ETF Trends joins Yahoo Finance Live to discuss the latest with ETFs and his key takeaways from the Exchange ETF Conference in Miami.

Video transcript

BRAD SMITH: As inflation runs hot, some investors may look to hedge by utilizing exchange traded funds. Dave Nadig of ETF Trends joins us now as part of our ETF report brought to you by Invesco QQQ. And Dave, we got to start off with how some investors are leveraging exchange traded funds, especially during a time of inflation and inflationary hikes that we're seeing right now.

DAVE NADIG: Yeah, sure, I'm down here in Miami Beach, where we just wrapped the Exchange ETF Conference, the first big ETF event we've been able to have in the last two years. And I'll tell you the two things everybody wanted to talk about were inflation and rising interest rates. The inflation story, obviously, we all saw that print last week or earlier this week that, I think, really opened a lot of eyes. And so people were really looking at interesting new ways to try to get inflation.

Earlier this year, we saw a big run-up in a lot of commodities ETFs. And I think that was a sort of an initial run. But now we've seen folks looking a little bit further afield. And I'd highlight one that I think was a great recent approach to this. And that's the AXS Astoria Inflation Sensitive ETF. That's PPI is the ticker. And this is a combo platter of inflation fighters. It's got a little bit of commodities, it's got a little bit of TIPS, but it's also got cyclical equities.

And I think that's really an interesting way that a lot of investors and advisors are trying to play. Rather than trying to pick the perfect hedge, why not have a little bit of everything? That's an approach that I think has done very well. It's pulled in about $50 million in about 50 trading days. That's a pretty good initial run. So I think that's probably where we're going to see folks looking. Obviously, folks always look to gold and the gold ETF, like GLD, but I think that's not really doing it for folks. People are really looking for something that's going to give you that economic response to inflation, not just sort of that traditional hedge.

BRAD SMITH: What about those who are still waiting for a spot Bitcoin ETF? A lot of interest has grown there. Do you believe that the regulatory landscape will change this year?

DAVE NADIG: I don't think it's going to change this year, but again, another big topic of conversation here. Folks were walking around with t-shirts that said, and still no Bitcoin ETF. It's almost become a bit of a joke in the industry that it has taken the SEC so long to do the right thing and give a clear runway for folks that want spot Bitcoin or spot crypto exposure in an ETF wrapper.

We've seen some of those initial products come out, BITO being the big one that trades Bitcoin futures. We had another recent approval last week of a traditional 33 Act type product, but still no Bitcoin ETF. I don't think we're going to see that in this calendar year. There's a bit of horse race going on among ETF pundits. And I would say the current best guess is maybe sometime mid next year. But the current insight we're getting from the regulators is not positive.

BRAD SMITH: And then additionally, while we have you, there's been a ton of discussion around thematic ETFs over the past five, seven years. With that in mind, ESG ETFs certainly has been at the forefront of that conversation as well. What's the discussion like there, the anticipation, and even some of the fund flows or the volume flows, I should say, into ESG ETFs?

DAVE NADIG: Yeah, so last year in the beginning of the year, we had a lot of interest in ESG ETFs. We track advisor research on our websites at ETF Trends and ETF Database, and we saw huge, huge interest in a lot of really interesting products, products like VOTE, VOTE from Engine Number 1 that really is taking an aggressive approach to corporate governance, getting board seats on Exxon, things like that. However, so far, in really the last six months, that research has fallen off a cliff. We're down about 50% in advisor research.

And that's about how much the flows have come down as well. There's still a steady trickle into ESG, but I think we're at the beginning of a fragmentation in the ESG market, where folks who have really strong opinions have some great products to choose from. But otherwise, they're looking to sort of the broader products, things like S&PE, which is a version of the S&P 500, with just a little bit of an ESG skew. That seems to be the way people are looking to go forward. And when we look at the regulatory environment, I think ESG is going to continue to be a part of the conversation, but may not be the driver of flows.

BRAD SMITH: Dave Nadig, who is the ETF Trends guest joining us now, Dave, we appreciate the time and the summary from the discussions taking place from-- at the ETF conference that just wrapped up.