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ETF Trends and Moneylife team up to bring you the ETF of the Week.
00;00;36;18 - 00;00;57;27
Speaker 1
Hi, it's Chuck Jaffe, host of the ETF for the Week, but also have my own weekday podcast called Money Life on the December 5th edition of my show. I was joined by Todd Rosenbluth, head of research at VettaFi, and we talked investments in a segment called The Money Life Market Call because it's all about ETFs and we know you want to hear VettaFi is thinking on that subject.
00;00;58;06 - 00;01;32;07
Speaker 1
Here is that interview with Todd as a bonus episode of the ETF of the Week. Enjoy. Todd Rosenbluth, head of research at VettaFi, is here. We're talking exchange traded funds now in the money life market call. Welcome to the Market Call. The part of the show where we talk with experienced money managers about how they do their job, what they look for that determines their buys themselves, what they see happening broadly on the market and how they put it all together.
00;01;32;17 - 00;01;56;08
Speaker 1
My guest today is Todd Rosenbluth. He is the head of research at Verify. Now, of course, you listen to Money Life. You know, verify. Well, that's where Tom Lydon comes from. He, of course, does the ETF of the week with us. But we say each week when we're talking with Tom Leyden that Verify has this great suite of tools, research and data that's available for you so that you can be a better investor in exchange traded funds.
00;01;56;19 - 00;02;15;01
Speaker 1
Well, Tom helps to run the company, but Todd, he's the head of research. Todd Rosenbluth is the head of research. So he's the guy behind a lot of that research, which you can check out for yourself at verify dot com. Todd Rosenbluth is also, like me, a proud graduate of the University of Michigan. Todd, go blue. Great to have you back on Money Life Go Blue.
00;02;15;01 - 00;02;16;05
Speaker 2
Exciting to be here.
00;02;16;14 - 00;02;35;15
Speaker 1
So we always start with methodology and you've got a methodology that quite honestly, you know, you have a long career. We've talked for you in previous jobs when you were working with CFR research, an S&P Global market Intelligence and all the others and at verify. I think you've tried to distill it all and make it the best you can.
00;02;35;15 - 00;02;41;14
Speaker 1
So explain what it is that you are using to say these funds stand out to me. These funds not so much.
00;02;42;12 - 00;03;05;03
Speaker 2
So I have, as listeners may know, because I've been a guest when I worked at S&P and at Cfra, heading up research, I have a big belief in looking what's inside the portfolio, taking a more forward looking approach, and I've carried that on with us and verify. So we don't have research set as a by hold or sell recommendation on individual ETFs like I did in the past.
00;03;05;07 - 00;03;26;01
Speaker 2
But we're following what investors and biases are telling us about their sentiment profile and what's going on in the marketplace. And we're offering investment ideas to give them a range of choices as to how they might want to tackle what is top of mind to them. And we cover a 3000 plus ETFs because that's how many that are trading.
00;03;26;09 - 00;03;38;28
Speaker 2
It helps us to be able to see the forest and the trees. So really excited to be here, happy to talk to you about what we're seeing in the market, what advisors and investors are telling us and then how perhaps people can can take advantage of that.
00;03;39;15 - 00;04;05;26
Speaker 1
Well, and let's just focus in on the idea that when you are looking at holdings, it's a mix there of like how well are the holdings doing? But also how are they put together? In other words, if you have a portfolio where somebody is holding a lot of high risk stocks versus something where somebody is trying to be super safe, you may say, oh, well, this one's likely to return more.
00;04;05;26 - 00;04;13;24
Speaker 1
But oh, by the way, are you willing to take the risk? Right. It's a combination of holdings and how they are amalgamated in in each fund, right?
00;04;14;09 - 00;04;48;02
Speaker 2
Correct. So I'm not advocating for or against the S&P 500 through an ETF like Spyder, S&P 500, ETF, SPY or the INVESCO, S&P 500, Equal Weight ETF, RSP. But those hold the exact same companies. Just the weightings within those portfolios are notably different, of course. So Apple and Microsoft are sizable positions within SPI and they're 20 basis points, less than 1% of the portfolio in RSP.
00;04;48;02 - 00;05;00;23
Speaker 2
And so smaller companies in the S&P 500 take a bigger weighting. So you can't just have a view that you think the market is going to go up or the S&P is going to go up. It's how is it constructed and then which one is right for you.
00;05;00;23 - 00;05;24;20
Speaker 1
So and then how do you deal with market fluctuations? Because at any given time, like we've had this year, a market driven by seven stocks. So obviously when you have, you know, a broad market that has just a few people participating in the rally, that's going to favor the one that is market cap weighted the SPI as opposed to the equal weighted, but market conditions change.
00;05;24;28 - 00;05;35;04
Speaker 1
So how frequently does the analysis change? You know, how often do you go from like, yeah, we may like both of them, but this is a time for this one and this is the time for that one.
00;05;35;18 - 00;06;00;03
Speaker 2
So we are regularly seeing what's going on in the marketplace. I don't think investors want to be tactical and make changes from from one ETF to another daily or weekly, but we're having notable shifts in the marketplace. We have an upcoming you know, the Federal Reserve has been raising interest rates throughout 2023. They likely have paused and have stopped doing so.
00;06;00;03 - 00;06;20;23
Speaker 2
And there's expectations heading into 2024 and in 2024 that there will be rate cuts. And so, for example, we add verify recently hosted a symposium. I think Tom Price probably talked about it where we asked investors what their views are on the marketplace and how they're willing to take on risk. And we saw this was just this week.
00;06;20;27 - 00;06;42;18
Speaker 2
The majority of people who responded are willing to take on more interest rate risk heading into 2024, that they're willing to go further out into intermediate term or long term products. Two thirds of the audience that we spoke to planning to take on more risk as opposed to less risk, it was more split from an interest rate perspective.
00;06;42;26 - 00;07;12;01
Speaker 2
It was more split between willing to take on credit risk. People still are hesitant to do so. So we are now advocate and we did. We recently wrote an article saying let's take a look at some of these intermediate term bond ETF and I just change subjects from equities to fixed income for the listeners. But let's take a look at some of these intermediate term bond products from some of the firms that offer popular short term products and here's what you get.
00;07;12;01 - 00;07;23;20
Speaker 2
Here's the reward potential. Here is the opportunity that's happening. And happy to name some of those examples for you and the listeners. But that's that's an important that we're heading into a new year, a new regime.
00;07;24;11 - 00;07;43;12
Speaker 1
It absolutely is. So I can understand how that all plays out. So now let's take a look and go what are the areas of the market that you particularly like right now or that the research is telling you you like or that the advisors and others are telling you like? And what are the types of funds best suited to use in that spot?
00;07;43;26 - 00;08;14;20
Speaker 2
Let me just use that as the example of what I just had a within fixed income. So we've seen strong interest in the ultra short bond ETFs in 2023 Bill, which is as low risk as you can get. It's 0 to 3 month or 1 to 3 month Treasury bills. It's taking in tremendous amount of money. We are encouraging folks that want to stay within the same fund family to look at something like the Spider portfolio, Intermediate Treasury, ETF Spy.
00;08;15;04 - 00;08;38;11
Speaker 2
So you take on a little bit more interest rate risk. You're still getting paid a nice, handsome yield of close to 5% and it's just three basis points in fees. So 0.03 or if you want a more active approach, there's the PIMCO Active Bond ETF, Bond D, which again, 5% yield duration, so slightly higher right now than then.
00;08;38;14 - 00;09;07;01
Speaker 2
That index based spider product for people who own Mint am I in T which is PIMCO's active short maturity ETF Bond bond yes it's really bond they got that ticker the PIMCO Active Bond ETF could be a good alternative for them. So within the fixed income space, we think taking on we think investors want to take on more risk and those are an index and an active base product for them to consider.
00;09;07;25 - 00;09;09;21
Speaker 1
What about on the equity side of things?
00;09;10;09 - 00;09;45;03
Speaker 2
So we've seen a really strong year, almost 20% growth in the S&P 500 and growth stocks in particular have done even better. Technology stocks have done really well. We're still bullish. We think there's still room for growth within our upside potential, but we could see more value oriented strategies or value tilted strategies do better. So Vanguard value ETF, VTB is a tilt towards value that we think could resonate again in 2024.
00;09;45;21 - 00;10;05;17
Speaker 2
Given that the Fed is likely to start cutting interest rates and so more higher dividend yielding areas of the marketplace that tend to be favored in the value area could do better in 2024. Certainly they couldn't. It's hard to do much worse than they did in 2023 because growth was in favor. So a reversion to the mean could happen.
00;10;05;24 - 00;10;14;13
Speaker 2
Interest rates falling could be a positive for them as well. So lots of lots of positivity happening in a shifting environment, we think.
00;10;15;03 - 00;10;24;25
Speaker 1
What about international versus domestic? I mean, are you are you tilting one way or the other? Is this a time, given everything that's going on, to be looking to diversify more fully?
00;10;25;16 - 00;10;54;13
Speaker 2
I think in the beginning of the new year, investors should reallocate their portfolios. I believe that I didn't pull the analyst up in front of me, but I believe that the U.S. CPI has outperformed the broader developed international markets. I will try to go on to ETF DB dot com. Sorry for that shameless plug to see if I'm correct on that, but it's important to just rebalance your portfolio at the beginning of the year.
00;10;54;22 - 00;11;20;15
Speaker 2
If we have as I think is correct. Yeah ASPI is beating EFA by seven 800 basis points this year. So you might want to reallocate into international to stay diversified and the iShares core MSCI EFA ETF I EFA is perhaps the most one of the more widely used of those products and is low cost so that might be a good go to for folks.
00;11;20;21 - 00;11;28;18
Speaker 2
So you just make sure you're diversified. You never know what's going to happen in the new year and you want to make sure you're providing yourself with with a balanced portfolio.
00;11;29;07 - 00;11;41;18
Speaker 1
Well, now we're going to get your quick and dirty take on some ETFs that my audience is particularly interested in. Quick and dirty.
00;11;41;18 - 00;11;45;02
Speaker 3
This is the most exciting thing to ever happen in the history of history.
00;11;45;02 - 00;12;07;29
Speaker 1
Well, I'm not sure it's quite that exciting, but it's great to get the take of Todd Rosenbluth, head of research at Verify on some ETFs, a wide range of them that you guys are interested in, and you can put any of our guests to the challenge. All you need to do is send your name, your hometown, and the ticker symbols you're interested in for ETFs, traditional mutual funds, closed end funds, or of course, stocks.
00;12;08;04 - 00;12;24;00
Speaker 1
Send that to me at Chuck money live showdown. Com we'll add it to our list hope it makes it into an interview soon. We start today with a request from Tom in Smithfield, Kentucky. He wants to know about fidelity blue Chip growth, which in ETF form trades under FBC BCG.
00;12;24;20 - 00;12;47;27
Speaker 2
Yeah so I like that this was chosen I mentioned I think that value's got a chance do better relative than it has beforehand but a high quality growth strategy, one that's actively managed like BCG, is a good way of going. You're getting a well-established manager, but now you're getting the benefits of an ETF structure, tax efficiency, lower cost.
00;12;47;27 - 00;12;53;14
Speaker 2
So if you want to stay in growth, I think an active approach like this Fidelity product is a good one.
00;12;53;23 - 00;13;12;19
Speaker 1
Oh yeah, beautiful. We could make a fortune. That was a buy on f BCG, Fidelity Blue Chip Growth. Our next request comes from Rick in York, Pennsylvania. He wants to know about Ash Dog. That's the Alps sector Dividend Dogs ETF.
00;13;13;13 - 00;13;37;14
Speaker 2
So I'm glad we picked this one. One. What an amazing ticker. Even if you don't have a pet at home like I do as dog is just a memorable ticker. This is the highest yielding stocks within each of the sectors of the broader market. Markets are ten of them. So it's a version of the dogs of the Dow that many of us grew up with just in ETF form and more sector diversified.
00;13;37;22 - 00;13;53;20
Speaker 2
And so if you want to get income, we think income is going to be important in 2020 for a nice diversified approach. Like s stock in an index form is a good way of doing it. So yeah, I can't wait to hear if you're going to be barking in favorable tones next.
00;13;54;03 - 00;14;19;16
Speaker 1
Well, that dog just say hi there. Yeah, you could say that s dog just said hi there. That was a buy on the dog. The Alps Sector Dividend Dogs ETF sticking with dividend oriented funds. Javier in Wilmington, North Carolina wants to know about Devoe that's the Amplify CW P enhance dividend income fund.
00;14;19;23 - 00;14;39;05
Speaker 2
Yeah so Devo I like that he's saying it that way too. This is a twist on well this was different than that the one we talked about for a couple of reasons. One that there's active management picking those stocks as opposed to just being an index based approach. And then there's covered calls that are used on top of this to generate enhanced income.
00;14;39;05 - 00;14;48;04
Speaker 2
And that's going to provide some additional downside protection that's going to give you additional income in a income oriented marketplace. Devo's a good ETF.
00;14;48;18 - 00;15;06;21
Speaker 1
Well, by the way, I like calling it Devo, but I wanted to make it clear it's not Devo like the band, right? It's, you know, that's Devo. This is Devo. So, you know, because we are not men, we are Devo. We need to make sure that we are actually making sure that everybody knows which fund we're talking about.
00;15;06;27 - 00;15;19;24
Speaker 1
That's a buy on the Amplify. See WPP Enhanced Dividend Income Fund. Come on, let's find Richard in Chula Vista, California wants to know about effort what that's the iShares floating rate bond ETF.
00;15;20;18 - 00;15;42;06
Speaker 2
So I probably showed my hand a bit by saying advisors investors are expecting that the Fed is going to cut interest rates and are willing to take on a bit more interest rate risk. The benefits of float is that you don't take on interest rate risk. You're protected against rising interest rates, but you don't benefit when rates are falling.
00;15;42;06 - 00;15;50;07
Speaker 2
And so I think there's better alternatives in the fixed income space than a floating rate product is a good product is not the right time for it in 2024. Yeah.
00;15;50;07 - 00;16;22;20
Speaker 1
So while we sometimes say, you know, good company, bad stock, this is good fund, not the right time, other alternatives which we talked about, Spotify, Bond, etc. but float the iShares floating rate bonds that sell. Now that was a sell and we finished with a request from Tom in San Francisco. And we're going places we haven't gone yet in this discussion because he wants to know about the Aberdeen Bloomberg all commodity strategy K one free ETF ticker symbol BCI.
00;16;23;04 - 00;16;48;06
Speaker 2
Yeah I like the we're adding in commodities into the conversation but we touched on the benefits of diversification through international investment. There's the benefits of diversification through commodities as well. And we certainly saw in 2022 having something other than stocks and bonds in your portfolio was rewarding. That could very well be the case in 2024. I like this is a diversified across various commodities.
00;16;48;06 - 00;17;05;28
Speaker 2
This isn't just focus on gold or energy. You get those as well as whole range of agricultural products too. So and we don't want to get in the weeds here, but you don't have to worry about Q1 from a tax standpoint with this ETF. It's just a simpler way of getting commodity exposure through BCI.
00;17;06;04 - 00;17;26;06
Speaker 1
Yeah, it sure is. We don't want to get in the tax weeds, but understand anybody who's ever done anything commodities can generate a K-1 It's just extra tax paperwork that just kind of makes your butt hurt. That's really what we're talking about. But no pain here because BCI not only avoids the K one, but the Aberdeen, Bloomberg, all commodity strategy K one free ETF.
00;17;26;14 - 00;17;40;02
Speaker 1
That was a buy would you mind stepping in said I've got a purchase to make and well go step we have to step aside you can make that purchase or not. We have to step aside because we've come to the end of our time. But Todd, always great to chat with you. Thanks so much for taking the time.
00;17;40;07 - 00;17;41;25
Speaker 1
We'll do it again in 2024.
00;17;42;27 - 00;17;44;20
Speaker 2
Sounds good. Thank you. Go Blue.
00;17;44;20 - 00;18;04;29
Speaker 1
That's Todd Rosenbluth, Proud Michigan Brad and the head of research at VettaFi. Learn more at VettaFi.vom and on Twitter at Vetta_Fi. Todd is on Twitter or X at @ToddRosenbluth.