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Some ETF investors are betting on the Fed changing course

AdvisorShares Founder and CEO Noah Hamman sits down with Yahoo Finance Live to talk about how ETF investors are positioning themselves against the Fed's monetary policies and interest rate hike cycle, as well as launching crypto and drone tech ETFs.

Video transcript


- Investors are putting money toward global equity funds, seeing money inflows last week for the first time since early April. We want to bring in Noah Hamman, AdvisorShares Founder and CEO, as part of our ETF report brought to you by Invesco QQQ. Noah, it's great to see you again. Let's start with that data point, because Refinitiv Lipper was out saying that investors buying-- investors bought a net $6.2 billion worth of global equity funds last week. Is this a start of a larger trend? Does this give us some reason to be bullish right now?

NOAH HAMMAN: It could. Internationally, you know, it's struggled performance-wise for quite a long time. We've only started to run into performance challenges in the US stock market late last year and throughout the beginning of this year. So it's not surprising that flows are starting to move more globally and more internationally, especially if the Fed's going to continue with not just tightening relative to their balance sheet but increasing interest rates. So that's probably not a complete surprise, even though the markets are still pretty high right now.

- And Noah, on the flip side of this because then Vanda Research was also out with data points saying that traders also bought a near-record amount of bond ETF. So from your perspective, I guess, is that signaling then some calls for concern or maybe some calls to be a little bit more conservative?

NOAH HAMMAN: Well, I don't know that it's calls for being more conservative. I think that's maybe some investors placing a bet that the Fed changes their mind. That it will be difficult for them to continue to increase interest rates given still supply chain issues, obviously growing inflationary environment. But then you think of the size of the debt and the servicing of, you know, our US government debt-- with each interest rate increase it becomes pretty significant and likely we'll see that ripple effect on the stock market, even though I think the Fed balance sheet drives more of that. But I would look at those bonds as suggesting that it's more people making a bet that the Fed's gonna change their minds because bonds have been down along with equities this year as well.

- Well, another thing that's been down-- and you're actually getting into this space-- is Bitcoin and crypto. Certainly, we've seen a lot of volatility. I know you're out with a new ETF-- CRYP it's a managed Bitcoin strategy. When there's so much volatility in this space, what do investors need to know? I guess, how does this fund then account for some of that volatility?

NOAH HAMMAN: So investors just have to have a plan, right? They've got to know when they want to get in, how often they want to get in, when they want to get out, limit orders, things like that. And the challenge with Bitcoin, it is so volatile that as new investors are learning about it and learning the utility of it and the value and the usefulness of it, that volatility will scare you. Right? Over the last 6 plus months, it's down roughly 50%. Most investors really don't want to participate in something where they've got to make the decision of when to get in, when to get out.

And that's what's different with CRYP. We're working with Mark Yusko and the team at Morgan Creek Digital. They have experience running, really, what is a trend-following strategy trading in Bitcoin. But for the first time, that strategy's in an ETF that anyone can buy via CRYP. And that's what it does. It'll use momentum and trend-following to decide when to be fully invested and when to pull back from that. So for example, right now, it's sitting about only 50% invested in Bitcoin.

- And Noah, so far, what has the interest been like in this space or specifically in your ETF, because it comes at a time when maybe crypto investors hear that word and they're trying to steer clear of it?

NOAH HAMMAN: Yeah. It's a little bit of what we're seeing. The fund's only a month old now but very, very small. Low trading volume. I think the price probably has to turn around a little bit to pique investors' interest again. But I think when that happens, and they're searching for a solution of how to get that Bitcoin exposure, they're still faced with the same decision-- you know, buy it through Coinbase, buy the physical, buy the ETF, but all are fully invested. I don't expect the volatility's going to go away any time soon. Or find something like this, that's more of a managed solution. So this is not something that people would frequently trade. It's something that if they want the exposure, it's a little bit more of a set it and forget it type of investment strategy that gets you exposure to Bitcoins via futures.