Alexis Christoforous of Yahoo Finance and Cinthia Murphy, managing editor of ETF.com, discuss ETFs to watch in 2021.
Video transcription
ALEXIS CHRISTOFOROUS: It’s time now for our ETF report, brought to you by Invesco. I want to welcome Cinthia Murphy. She is chief editor of ETF.com. Cinthia, good to see you again.
I’m curious as to how the starters went. I know we are only in the first week of the new year, but we know that last year we saw record inflows in exchange-traded funds like a basket. How are the entries so far? Because, traditionally, January is a month when people start putting their money on the market.
CINTHIA MURPHY: Yes it’s true. The first week was kind of normal, to tell you the truth. We didn’t see a huge number of new assets coming to the market. But it has been very active, however. It has been very focused on some specific segments that worked well and that suddenly got a boost with the result of Tuesday’s election.
So it has been a very clear story where the demand is about to start the year. But the numbers are by no means record-breaking at the beginning of the year. It is slowly increasing as people return from vacation.
ALEXIS CHRISTOFOROUS: All right. Well, probably your stay, so to speak, during this pandemic. Let’s talk a little bit about the trends you are seeing this year. And I think many of them will be familiar to us. These are the trends we saw in 2020, probably just gaining more momentum. But it seems that clean energy is still a space within ETFs that we should look at to be potential winners under the Biden government.
CINTHIA MURPHY: Absolutely. Clean energy is really a long-term story if you believe in climate change, if you believe that the future is greener. So it actually has long-term legs.
In the short term, since September – I think the first presidential debate is when Biden came out and talked about a $ 2 trillion investment in renewable energy, talked about tax credits for green energy companies. And it started to accelerate that upward momentum.
Some of these funds, such as the TAN, for example, which is a solar ETF, rose by 250% in 2020, and this year it has already risen by another 15% since Tuesday’s elections confirmed that Biden will have very little resistance. has really put money and effort into developing the green energy industry. ICLN, which is a broader clean energy fund with renewable energy, hydraulic, wind and everything in between, has also grown dramatically.
So, I think clean energy is a segment that is about to really benefit if we really see the conversation, the campaign conversation, turning to numbers that support these industries, because they have increased a lot in the expectation of this big investment. So, let’s see if this materializes. And if so, if the policy is like this, if the money is like this, then we can see the sector performing very well going forward.
ALEXIS CHRISTOFOROUS: One sector that did not perform well last year was the banking sector. And we expect that to recover this year, especially now that we are starting to see yields increase slightly. And if inflation starts to heat up and the Fed is forced to move at the end of the year, we could see those finances come back. What is your perspective on these ETFs, those economically sensitive ETFs?
CINTHIA MURPHY: Yes, the banking system really has difficulties. I mean, obviously, the low-interest environment is the biggest enemy of banks, because that’s how many of them make money. They need this interest payment, especially the regional banks, because they don’t have a diversified line of business enough to escape the need for higher rates.
And a blue wave really supports the banks, because people expected more support from the government, which we saw rates go up a little bit. All of this is good news for banks.
But finances in general, I think, are also supported only by general reflections or the reopening of the economy’s trade, which has made investor sentiment more positive about value stocks. And the financial sector is the biggest sector that dominates all the value indexes out there, because they are so low since 2008, really, that all these values - many of the value stocks are financial stocks.
So you combine a more positive policy, potentially perspective, you combine stimulus, you combine higher rates and the demand for value play, which is the economy’s reopening move – it has been the perfect storm for finance.
I don’t know how much leg you have here. I mean, we have to see the banks’ performance. If people continue to lose jobs, it can be difficult to repay their debt. This can hurt banks. So it is not a sure bet, but it has been a very interesting move and it did very well at the beginning of the year.
ALEXIS CHRISTOFOROUS: All right. Let’s leave it there. Cinthia Murphy, editor in chief of ETF.com. Always enjoy talking about ETFs with you. Thanks.
CINTHIA MURPHY: Thanks for receiving me.