ETF Hype Check, Shareholder Yield, & Tracking Market Conditions
On this episode of ETF Prime, host Nate Geraci speaks with a trio of industry experts to discuss key stories and trends. He begins with Dave Nadig from VettaFi, exploring significant and hype cycle topics that have shaped the industry in the last several years. Geraci also interviews Meb Faber from Cambria, delving into their firm’s impressive growth and unique Cambria Shareholder Yield ETF (SYLD). The episode concludes with Todd Sohn from Strategas, who discusses the 10 ETFs he uses to assess market conditions.
Where do hype cycle topics stand today?
The podcast kicked off with Dave Nadig and Geraci covering the hype cycle of various topics. They started with Cannabis ETFs, acknowledging the industry’s struggles with regard to performance and institutional investment. Nadig emphasized the challenges faced by the cannabis industry, making investing in the sector a difficult endeavor. Nadig noted that this is an industry that investors cannot invest in as much as they may want to.
“I think a lot of people were very excited for this space as it looked like legalization was going to be a big part of the Biden administration,” said Nadig. He also emphasized the numerous challenges plaguing the cannabis industry, such as branding, distribution, and agricultural obstacles. This makes investing in the sector a difficult endeavor, dampening investor enthusiasm.
The conversation then turned to SPACs and IPOs, with Nadig expressing reservations about their inconsistent performance and lack of a unified pattern. He was skeptical about the SPAC frenzy and suggested that it may have been misplaced hype.
Other Hype Cycle Topics Covered
The pair also discussed “social media” investing. They discussed how poster children ETFs for the industry, like BUZZ and PP, have recently generated strong performances, but Nadig says he is not sure how long it may last. Nadig has perceived social media investing as a somewhat gimmicky approach to add to one’s investment portfolio. He described these funds as a snapshot in time and advised caution.
Geraci and Nadig also discussed direct indexing in their segment of the podcast. It has emerged as a standout trend for advisors, with projections indicating increased adoption. While direct indexing may not possess the same level of flash or excitement as other areas, Nadig stressed its importance as a tool for advisors. Adoption rates are decent, but projections indicate a significant uptick in the coming years.
“It is here to stay, and will continue to grow,” Nadig says.
The discussion then shifted to the space sector and AI. Nadig expressed doubts about the ability of the space sector to outperform as a whole and warned against expecting exceptional returns. He acknowledged ARK’s contributions to space sector research. As with social media investing, he advised caution when looking to invest in the category.
However, he was more upbeat when it came to artificial intelligence. Nadig highlighted the enduring impact of AI but warned against focusing too intensely on narrow slices of the vast and nuanced industry. Regardless Nadig says, “I think it is going to have a substantial effect on the economy forever.”
In addition, the pair delves into various other captivating hype cycle topics that reverberate throughout the remainder of the segment.
Cambria’s and SYLD Success
During the podcast, Nate Geraci interviewed Meb Faber, one of the minds behind the thriving investment firm, Cambria. Currently holding $1.9 billion in assets, the firm offers a lineup of 12 ETFs. Throughout the conversation, Faber emphasized the importance of accepting that one cannot control market fluctuations. Despite many challenges, the firm has survived through the years, even in the face of unfounded criticism from skeptics. Nevertheless, these experiences, according to Faber, only fueled his team’s resilience to strive toward success continuously.
“We are happy to have survived,” Cambria said.
Additionally, Faber talked about his firm’s ten-year anniversary of the Cambria Shareholder Yield ETF (SYLD), now the number-one fund in its industry. The fund utilizes a shareholder yield strategy that has gained prominence with its excellent performance, which has begun to capture attention across the ETF community.
ETFs for Market Conditions
To close out the podcast, Nate Geraci also engaged in an enlightening conversation with ETF analyst Todd Sohn from Strategas. Sohn firmly believes that ETFs provide a valuable window into the psychology of the markets, offering insights into the overall state of the economy.
Sohn highlighted ten funds he believes provide insight into market conditions. Among the funds he mentioned was the Vanguard Extended Market ETF (VXF), which focuses on non-S&P companies that may fly under the radar for some investors. He also mentioned the Fidelity Stocks for Inflation ETF (FCPI) as useful for investors wanting to pay attention to relative performance analysis. Another noteworthy fund he discussed was the First Trust NASDAQ ABA Community Bank Index Fund (QABA), which serves as a gauge for banking stress that can shed light on consumer trends. The funds mentioned throughout the podcast help Sohn gauge the ever-changing market landscape and provide informed guidance to his clients.