Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA, joins Yahoo Finance’s Kristin Myers to break down the best ETF’s to buy ahead of the 2020 presidential election.
Video Transcript
KRISTIN MYERS: And for today’s conversation, we’re joined by Todd Rosenbluth, head of ETF and mutual fund research at CFRA. Todd, good to be chatting with you again. I want to start on the election, less than a month away until the general election.
And we keep talking over and over and over again about election risk and any volatility that will be associated with the elections. Wondering what you are expecting going forward.
TODD ROSENBLUTH: So I do think we’re going to see more volatility into the election. We’ve started to see– and I think it’s a great sign– that investors using ETFs have continued to move money into fixed income ETFs. That’s a much more defensive exposure.
We’ve seen more– in fact, we saw in September Treasury-related products like TLT and SHV, TLT being the long end and SHV being the short end of it. We’ve also seen ultra short ETFs continue to gain in popularity. That’s a good way of playing the election if you just want to wait to see what happens and not take on that same level of equity risk.
KRISTIN MYERS: So to that point, is, you’re talking about ETFs are usually a nice way to avoid volatility in the market. Specifically, what ETFs or what sectors do you think folks should be looking at?
TODD ROSENBLUTH: So we at CFRA have a balanced approached– a couple of growth oriented cyclical sectors like technology and communication services and then defensive sectors like consumer staples and healthcare. You get a balance of that.
Obviously, the defensive sectors like healthcare and consumer staples offer stronger dividend yields, stronger balance sheets. And then technology gives you more of a growth angle. And I think the last time I was on, we were favorable about technology. We continue to be favorable about technology, both in a broad way with ETFs like XLK and VDT. Those are the two largest of the broad ones.
But also, tactical– cloud computing has been a very popular theme. And Global X Cloud Computing, CLOU, is a great way of being able to play that. Targeted, you’ve got exposure to some of the software companies, and Zoom, among others, being part of the portfolio.
KRISTIN MYERS: Wondering because that kind of reminds me, something that you and I have even chatted about before, which is thematic ETFs. There is that work-from-home ETF, which would, of course, include some of those cloud computing companies, like you just mentioned, Zoom, for example.
Are we seeing a lot of inflows to some of those work-from-home ETFs? Are those, and more broadly, are thematic ETFs still doing well and popular?
TODD ROSENBLUTH: Very much so. So, in the third quarter, we saw quarter to quarter growth of over 40% in thematic ETFs. Cloud computing, clean energy, which are, obviously, two different ends of the spectrum in terms of thematic investing. We also saw healthcare related ETFs, like Ark’s genomics product, ARKG, being very popular with investors.
We think thematic investing has a great future because you get the exposure that you want in a targeted way, but the benefits of diversification towards some of these long-term fees. So we think cloud computing, cybersecurity, healthcare, these are all themes that are going to resonate for years to come. And you’ve got a range of ETF options to consider.
KRISTIN MYERS: Wondering, Todd, what won’t be performing well going forward, as a lot of investors are starting to look at their portfolios and make some shifts.
TODD ROSENBLUTH: Yeah, so we have– so we’re positive on those other sectors. Financials is an area that we think is likely to struggle. You know, we’re heading into earnings season, and we’ll see more information from the banks.
But with interest rates where they are, with the economy likely to still be relatively sluggish before moving into growth in 2021, value areas of the market, in particular, financials, is likely to lag behind. And we certainly saw investors act that way. XLF, which is the largest of those financial sector ETFs, saw outflows during September. And we think we could see continued pressure on the financials group, or at least, in underperformance versus the broader market.
KRISTIN MYERS: Todd, I have about enough time for one more question with you here. Wondering where you’re seeing perhaps some opportunities for growth. The reason I’m asking is, I was chatting a little bit earlier with Mike Clarfeld, who actually pointed out utilities. It’s lagged the broader market, but he sees that performing well going forward.
I know you’ve talked tech. That, of course, has led the market over the last several months. But is there anywhere in value or some of those value areas that folks could actually start to see a lot of growth?
TODD ROSENBLUTH: Yeah, so we think consumer staples is the more value oriented and dividend paying sector to pay attention to. You know, in this environment that we’re in with volatility, as well as the fact that we still don’t know what’s going to happen from a consumer spending standpoint, staples companies and staples related ETFs we think are better options for investors.
KRISTIN MYERS: All right, we will leave that there. Todd Rosenbluth, always great chatting with you, head of ETF and mutual fund research at CFRA, thanks for joining us today.
TODD ROSENBLUTH: Thank you.
