ETF Edge: Lydon on Investor Sentiment and Clean Energy

ETF Edge host Leslie Picker had VettaFi’s Tom Lydon, Matt Bartolini of State Street, and Horizon Infusion’s Tim Johnson on to discuss the trends.

Investors haven’t been buying much into the rally. Flows have been positive, if slightly lower than historic averages.

Bartolini expressed his belief that investors haven’t been buying into the summer rally, pointing to slightly lower than historic averages in flows. Lydon had a different perspective. “I take the other side of the bet,” said Lydon. “I think advisors are at the most positive they’ve been in over a year.” Lydon pointed to positive numbers among growth ETFs, money coming back into corporates, and high yields on the fixed income side, with flows even coming out of defensive dividend funds. “The surveys we see from advisors are saying because the Fed is a little more clear on the rising interest rates and fighting inflation, they are less concerned about — yes, there will be a recession, but how deep will that recession be? So that, in turn, translates to them being more bullish on the market.”

With last week’s passage of the Inflation Reduction Act, an enormous amount of investment is going to clean energy and as the Biden administration looks to shore up supply chains and contend with the climate catastrophe.

Lydon noted that two of the biggest clean energy ETFs, the iShares Global Clean Energy ETF (ICLN A+) and the Invesco Solar ETF (TAN C+) are cap-weighted. Collectively they have over $9 billion in holdings. There are other places investors can find good exposure to clean energy companies that stand to benefit from the investments. “You need to look at other areas, you need to look at smaller companies, you need to look at companies outside of the U.S.,” Lydon said, noting that producers of lithium and batteries will be critical and that investors can find meaningful exposure in a variety of places and industries.

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