ETF of the Week: PALL

PALL is a commodities ETF, as palladium is a precious metal that is used mostly in catalytic converters to help reduce greenhouse gas emissions in vehicles. Palladium is a resource that is currently being impacted by the war in Ukraine, since Russia has historically exported 40% of the world’s supply.

Oil and the energy sector aren’t the only areas that have been impacted by the conflict, Lydon explains; metals, wheat, and potash, a key component of fertilizer, that were all main exports from Russia have all been affected.

“Bottom line is, either we’re going to continue to do business with Russia in certain areas, or these areas may be cut off as well, and if so, we might see some prices that would be even that much higher than what we’re experiencing right now,” Lydon says.

Lydon goes on to discuss the turning tides of markets and investments, with war overseas and historically high inflation compounded with a hawkish Fed all having negative impacts on bonds. At the same time, growth stocks such as tech have been hit hard with volatility, with 44% of Nasdaq stocks currently at 50% below their highs.

With stocks and bonds both areas of challenge for advisors and investors, there has been a pivot to alternative investments such as commodities. Many of the commodity investment opportunities are through futures, which requires an additional level of understanding for investors before they allocate funds. PALL is one of the commodity funds that invests in the physical commodity, much like the SPDR Gold Shares ETF (GLD A-).

“If you actually invest in these, it’s not futures-based; you actually have palladium that’s in storage to support currently what’s in this ETF, which is important,” Lydon says.

As a commodity fund, PALL is one that investors could consider allocating to based around its 200-day moving average, although given the constancy of current events of late that are driving volatility, Lydon recommends looking at it based on a 50- or even 20-day moving average. Year-to-date, PALL is up nearly 60%.

Investors should consider commodities and the energy sector if they are looking for alternative investments to the S&P 500. With gas prices and other prices rising for consumers, it could be a difficult financial time ahead for many people.

“This is a way, if you have an investment account, to not only diversify away from all of the volatility you’re seeing in stocks and bonds; this is a way to provide some pricing protection for your day-to-day expenses,” Lydon says.