WisdomTree has “been telling people that inflation was going to be a problem and it was going to be higher than people expected for longer than people expected,” according to the firm’s global chief investment officer Jeremy Schwartz.
Speaking with NYSE’s Judy Shaw for “ETF Leaders, Powered by the New York Stock Exchange,” Schwartz said that this higher-for-longer inflation “is having implications across… all portfolios,” noting that even the bond space, which has been “the traditional, safe haven asset” and “anchor of 60-40 portfolios” is “having its largest drawdown in 40 to 50 years.”
So, WisdomTree has been counseling its clients “to be in floating-rate Treasuries,” particularly the WisdomTree Floating Rate Treasury Fund (USFR ), which has a one-week duration, the rates of which the issuer sets every week tied to T-bill auctions.
“So, in a year when bonds are down 9%, 10%, it’s flat,” Schwartz said during the interview, which was conducted at Exchange: An ETF Experience 2022.
Growth vs. Value
So, as inflation has been rising, so too have interest rates. This, according to Schwartz, “is causing duration within stocks.”
“So, the most expensive high multiple growth stocks have been what’s under the most pressure,” Schwartz said.
By contrast, value high-dividend stocks like the WisdomTree U.S. High Dividend Fund (DHS ) have fared better. Schwartz noted that as of April 12, the morning the interview took place, DHS was “up double digits” while the Nasdaq was “down double digits.”
So, Schwartz said that as inflation continues to be an issue, he believed “low-duration stocks, which is high-dividend stocks, are going to be in favor for some time.”
Direct Cryptocurrency Exposure
In discussing cryptocurrency, Schwartz told Shaw that while “regulators have not approved a spot bitcoin ETF,” WisdomTree is still working to provide investors with direct exposure to crypto.
Among such efforts is “working on direct indexes to get holdings through a custodian like a Gemini, where you could get an index, [or] an SMA opportunity tied to a broad diversified crypto index,” he said, pointing to the RWM WisdomTree Crypto Index, or RTREE Index, representing the crypto economy.
“You need to get the direct exposure and that’s what we’re working on with Gemini, the RTREE, and other platforms,” Schwartz said.
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