Record-Shattering Flows Into Stock ETFs Leave Bond Funds in Dust


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About 95% of stock funds posted gains last month, with around two-thirds of them beating the S&P 500.

The clear winner from the renewed appetite has been Vanguard Group thanks to its line-up of low-cost products. The $189 billion Vanguard Total Stock Market ETF (VTI) has seen the most inflows this year at $27.2 billion, followed by the $177 billion Vanguard S&P 500 ETF (VOO), which has absorbed $26.7 billion.

They may have been overtaken for flows, but it remains a banner year for fixed-income ETFs.

After a violent selloff created a liquidity crunch across bond markets, the Federal Reserve announced in March that it would buy ETFs for the first time. Billions poured into credit funds in the aftermath, curing deep discounts and putting them on track for a record 12 months.

The Fed has only purchased about $8.7 billion worth of corporate bond ETFs in total, but the central bank’s presence has been enough to give the products a stamp of approval. BlackRock Inc.’s $58.6 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has attracted $18.3 billion so far this year, putting it in third place behind VTI and VOO.

Total assets in U.S. bond ETFs stand at roughly $1.1 trillion, while their stock counterparts hold $4 trillion. If the equity rally gains further steam, that gap could grow even bigger.

“Flows follow performance,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “Investor confidence over the past couple months has also benefited greatly from positive vaccine news.”

©2020 Bloomberg L.P.

Bloomberg.com



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ETFs for the Driverless Car Revolution


Investors seeking exposure to the driverless car revolution now have the option of buying into exchange-traded funds (ETFs) specifically dedicated to driverless cars, electric vehicles, and other innovations in the automobile industry.

Among this class of ETFs are KraneShares Electric Vehicles and Future Mobility ETF (KARS), which debuted in January of 2018; InnovationShares NextGen Vehicle and Technology ETF (EKAR); which debuted in February 2018, and Global X Autonomous & Electric Vehicles ETF (DRIV), which debuted in April 2018. Prior to the introduction of these specific ETFs, there were no ETFs directly related to self-driving cars and electric vehicles, and only one ETF was focused on the automobile industry.

Key Takeaways

  • Investors seeking exposure to the driverless car revolution now have the option of buying into exchange-traded funds (ETFs) specifically dedicated to driverless cars, electric vehicles, and other innovations in the automobile industry.
  • KraneShares Electric Vehicles and Future Mobility ETF, InnovationShares NextGen Vehicle and Technology ETF, and Global X Autonomous & Electric Vehicles ETF are ETFs that are invested in driverless cars, electric vehicles, and other innovations in the automobile industry.
  • People looking to invest in driverless cars also have the option of adding ETFs to their portfolio that are focused on the automobile industry and related technological innovations, including First Trust’s Global Auto Index Fund or Industrial Innovation ETF by ARK Invest.

KraneShares Electric Vehicles and Future Mobility ETF

The KraneShares Electric Vehicles and Future Mobility ETF had $57.74 million in net assets as of November 27, 2020. The fund tracks the performance of Solactive Electric Vehicles and Future Mobility Index, which includes global companies involved with new transportation methods. These companies focus on electric vehicles or their components, technologies related to autonomous driving, shared mobility, lithium and copper production, hydrogen fuel cell manufacturing, and other innovations in the sector.

Ideanomics NextGen Vehicle and Technology ETF

The Ideanomics NextGen Vehicle and Technology ETF is made up of global stocks related to electric autonomous, or self-driving, vehicles. The fund invests in companies that fall into four categories within the sector: battery producers, original equipment manufacturers, suppliers, and producers of semiconductors and software. The ETF had $4.22 million in net assets as of November 2020.

Global X Autonomous & Electric Vehicles ETF

The Global X Autonomous & Electric Vehicles ETF seeks to correspond to the Solactive Autonomous and Electric Vehicles Index. The fund invests in companies that are involved in the development and manufacturing of software and hardware for driverless vehicles, and companies that produce electric vehicles and their components, such as lithium and cobalt. As of November 2020, the fund had $124.9 million in net assets.

Related Exchange Traded Funds Options

People looking to invest in driverless cars also have the option of adding ETFs to their portfolio that are focused on the automobile industry and related technological innovations.

First Trust’s Global Auto Index Fund (CARZ) was launched in 2011, and until 2018, it was the only ETF related to the automobile industry. As of July 2020, the fund had $44.35 million in net assets. The ETF tracks the NASDAQ OMX Global Auto Index, which includes nearly all of the major automobile manufacturers worldwide. Holdings include Honda Motor Company (HMC), General Motors (GM), Toyota Motor Corporation (TM), and Tesla Inc. (TSLA).

Another more broad investment option related to driverless cars is the Industrial Innovation ETF by ARK Invest (ARKQ), which launched in 2014 and had reached $633 million in net assets as of November 2020. This is an actively managed fund that invests in companies identified as being likely to benefit from technological advancements—including those related to electric and autonomous vehicles. Software and IT services companies, semiconductor firms, and automobile companies combine to account for about 80% of the portfolio assets.

ETF investors may also wish to consider a fund like the First Trust Clean Edge Green Energy Index Fund (QCLN). Launched by First Trust in 2007, the ETF focuses on companies involved in providing clean alternative energy. While there’s no direct connection to driverless cars, there is some significant overlap between companies involved in developing driverless cars and those involved in clean energy. This fund, which tracks the NASDAQ Clean Edge Green Energy Index composed of U.S.-listed firms engaged in developing clean energy, had $1.5 billion in net assets as of November 2020. Semiconductor firms, which are likely to be essential in creating driverless car technology, account for about a third of the portfolio holdings.



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Gold ETF: Gold ETFs set for biggest sales since March as haven demand ebbs


By Eddie Spence


Gold exchange-traded funds headed for the biggest weekly outflow since March as the prospect of a coronavirus vaccine curbed demand for a haven.

Investors have sold almost 18 tons from ETFs so far this week after Pfizer Inc.’s announcement of progress on a shot sparked hopes of a turning point in the fight against the pandemic. Bullion prices rose on Friday as the dollar weakened. The metal is still set for a weekly decline even as virus cases are surging in many nations and top central bankers cautioned that a vaccine wouldn’t end the economic challenges.

“Investors are getting nervous holding long gold positions because every rally runs into a brick wall,” said Georgette Boele, precious metals analyst at ABN Amro Bank NV. “I think there is more to come in the near term.”

Bloomberg

Spot gold gained 0.8% at $1,890.98 an ounce by 1:41 p.m. in London. It’s still down 3.1% this week, the most since late September. ETF holdings fell to 3,436.4 tons as of Thursday, the lowest level in six weeks, according to an initial tally by Bloomberg.

Traders are keeping an eye on rising infections. New York prepared for the possibility of school closures, Chicago urged residents to stay at home and California passed 1 million cases. In Europe, the U.K. reported the most infections yet. Federal Reserve Chairman Jerome Powell said the central bank and Congress would probably have to do more to stimulate the recovery in the future.

That should help gold climb in the first half of next year, once the pandemic is under control but loose monetary policy remains, according to Giovanni Staunovo, an analyst at UBS Group AG.

“Gold should find support in the first half as stronger growth expectations — driven by an eventual vaccine rollout — and higher oil prices push inflation expectations higher,” he wrote in a note. The bank lifted its price target for mid-2021 to $2,000 an ounce.

In other precious metals, silver climbed 1.8%, while platinum and palladium also rose. The Bloomberg Dollar Spot Index was down 0.3%, but is still set for a weekly gain.





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Here’s how to use ETFs to prepare for a Biden presidency


Solar installers fit solar panels on the roof of a home in San Francisco, California.


Justin Sullivan/Getty Images

“Infrastructure Week” has become a Washington punchline over the past four years. It’s a reference to smart policy that could likely have bipartisan support if it were ever made reality, except that time and again Washington political chaos gets in the way.

But if Democrat Joe Biden wins the White House in November, the country could be in for an “Infrastructure Term”, analysts think.

And there are actionable ideas investors can take advantage of now, and exchange-traded funds they can buy if they expect a Biden victory, on the belief that he will prioritize policies for modernizing the country’s existing road, rail, airports, electricity, water, sewage, communication systems and other infrastructure.

“Whether or not we get a ‘Blue Wave’” – that is, Democratic control of both Congress and the White House – “we will probably get some sort of infrastructure bill,” said Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors. “The other area we’re watching is clean energy. Even without support from a Democratic Senate I think clean energy could benefit a lot. Just like Trump did a lot through executive orders, Biden could do the same.”

Related: Financial markets have waited patiently for fiscal stimulus. That might change soon

There are several infrastructure ETFs on the market, but one that’s a favorite of Geisdorf and other analysts is the Global X U.S. Infrastructure Development ETF,
PAVE,
-1.58%

which sports the catchy ticker PAVE.

The largest ETF in the category is the iShares Global Infrastructure ETF,
IGF,
-1.20%

said Todd Rosenbluth, head of mutual fund and ETF research for CFRA. But it and others have substantial holdings from outside the U.S. that wouldn’t get as much of a bump from a change in leadership in the White House. Rosenbluth also likes PAVE, noting that its holdings are “mostly industrials with a little bit of materials.”  

In clean energy, Geisdorf likes the iShares Global Clean Energy ETF
ICLN,
-0.33%
,
a fund that’s tracked Biden’s fortunes in the polls relatively closely over the past year. “It’s perked up again in the past few weeks,” as Biden’s lead over President Donald Trump seems to have solidified, Geisdorf said in an interview. That said, “It’s run up quite a bit so you may not see as much follow-through there. There might be more upside potential for infrastructure than clean energy.”

In fact, clean-energy ETFs have been on fire this year. The iShares product is up 78% for the year to date, about the same as two of Rosenbluth’s picks, the SPDR S&P Kensho Clean Power ETF
CNRG,
+0.98%

and the ALPS Clean Energy ETF
ACES,

which he notes has a nice mixture of sectors among its holdings, from electric automakers like Tesla Inc.
TSLA,
+0.98%

to utilities like NextEra Energy Inc
NEE,
-1.37%
.
“These broadly diversified funds that have solar and wind and hydro power are good plays,” Rosenbluth told MarketWatch.

The big success story in the field is the Invesco Solar ETF, which is up a whopping 140% so far this year. Still, Rosenbluth said, “We like it. We think the underlying stocks have strong fundamentals and there’s room for that ETF to climb higher. A change in leadership would help.”

There’s less consensus on another popular narrative about a Biden presidency, the idea that a big fiscal stimulus bill will cause “reflation” – economic growth coupled with big borrowing to get it done, which makes bond yields rise.

See: Opinion: Value stocks are poised to crush growth stocks after the presidential election

“Value tends to outperform in an inflationary environment,” Geisdorf said. To make that bet, he suggests iShares Core S&P US Value ETF.
IUSV,
-1.12%

That’s preferable to a more focused bet on certain aspects
of the reflation trade, he thinks. In a reflationary environment, bond yields
overall creep up and the yield curve – the difference between shorter-duration
yields and those with longer maturities – widens, a positive for banks and
other lenders.

For now, Rosenbluth thinks investors might be safer sticking
with “growthier” securities.



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