With the NCAA Men’s Final Flour approaching this weekend, VettaFi’s vice chairman Tom Lydon joined Yahoo Finance to share his ETF Final Four, including strategies focused on China, gold, bonds, and banks. ETFs have picked up $90 billion in YTD net inflows according to VettaFi, Lydon noted, and though that sets a $360 billion target for the end of 2023, less than last year’s $600 billion total, there are standout areas in international equity and fixed income ETFs.
“The key thing is more money has been going into international equity ETFs than domestic, each with ETFs. And a lot of that’s because of the valuations that you’re getting overseas,” Lydon said. “We are seeing a pickup in demand for fixed income ETFs, and a lot of that might be tied to the Fed in the job that they’re doing so far battling inflation.”
The four ETFs in Lydon’s top flour included the Vanguard Total Market Bond ETF (BND ), the SPDR S&P Regional Bank ETF (KRE ), the WisdomTree Chinese Yuan Strategy Fund (CYB ), and the SPDR Gold ETF (GLD ).
Lydon shared the case for each ETF, starting with BND. Speaking to the background for bonds, Lydon noted the Fed has largely done well in fighting inflation, leading investors and advisors to move towards longer duration and lower credit quality available in a diversified bond ETF like BND. Despite its size, however, it would lose in a one-on-one match-up against KRE, even amid all the banking turmoil, he explained.
“I think when we look back and see what’s going on, there are a few outliers that… might have spoiled that pool for the rest of us,” Lydon said. “I think we’re going to see this market come back — and most importantly, during times of rising interest rates, regional banks actually make more money on the lending side than their bigger bank brothers.”
Picking between WisdomTree’s CYB and GLD, CYB may appeal amid a recent meeting between Chinese president Xi Jinping and Russian president Vladimir Putin in which Putin expressed his support for the Yuan as an alternative to the U.S. dollar, but GLD won out, to Lydon. Gold rose above $2,000 recently, he explained and tends to win out in the second half of inflationary periods. Backed by global jewelry demand, and price boosts from difficulty mining it, GLD beat CYB.
“I think it’s gold’s time. If gold doesn’t do well during this period of time, I think we’re all going to be wearing Bitcoin necklaces in the next couple of years,” Lydon said.
GLD also won the ETF final four overall, even despite a regional bank bounce back, Lydon said, with gold perhaps expecting a good move between now and the end of the year.
As for the basketball final four, and Lydon’s pick? The VettaFi vice chairman shouted out Connecticut to win this weekend’s tournament finale.
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