ETF Wrap: Watch out, dogecoin, as ETFs see surging 2021 demand, too

Here’s what happened?

One of the most popular bets in ETF land, Cathie Wood’s Ark Innovation ETF
ARKK,
-2.98%,
is facing severe selling pressure..

We’ve written about the fund a bunch. It has been buffeted as investors, betting on a broad U.S. economic reopening and the release of pent-up consumer demand this summer, have favored more cyclically sensitive sectors and value stocks rather than the highfliers that Wood tends to include in her funds, like Tesla Inc.
TSLA,
-0.83%
and Teladoc Health
TDOC,
-2.65%.

The interesting thing to note is that while popular bets like ARK are getting bludgeoned — though, mind you, it’s firmly up over the past 12 months — investors are piling into ETFs.

Notably, a lot of inflows from investors are going into some of the biggest ETFs.

“More money flowed into equity ETFs in the first four months of 2021 than all of 2020, and we could see more inflows to ETFs for 2021 while summer vacations are heating up,” Todd Rosenbluth, head of ETF and mutual fund research at CFRA, told MarketWatch.

The 10 largest ETFs have seen flows surge by about 48% from about $1.1 trillion to nearly $1.7 trillion as markets recovered from the selling induced by the coronavirus pandemic a year ago, according to CNN, citing data from Finbold.

CFRA’s Rosenbluth said that equity-focused ETFs, seeing inflows of $267 billion so far this year, have led the charge, and flows into iShares Core S&P 500 ETF
IVV,
+0.28%,
in particular, have offset outflows in fixed-income-oriented funds, as benchmark bonds staged a selloff, driving yields higher and prices lower, in recent weeks.

Rosenbluth’s chart illustrates the drive into equity ETFs over the past four months or so among the top 5 ETF providers:

The appetite for ETFs comes as the broader market has been heading higher, with the Dow Jones Industrial Average
DJIA,
+0.46%
and the S&P 500
SPX,
+0.29%
not far from record levels, if on increasingly uneven footing. Rabid interest in exchange-traded funds doesn’t exactly mirror the unfettered demand for meme assets like GameStop Corp.
GME,
+1.96%
or dogecoin’s
DOGEUSD,
-0.19%
stratospheric rise, but it’s worth watching which funds gain in popularity over the next seven months.

Rosenbluth said investors are being judicious in this case. “Investors are acting quite rationally rather than chasing thematic ETFs higher or pushing up more narrowly focused ETFs.” He said that investors are primarily gravitating toward investments in value-oriented areas of the market, those that have otherwise been unloved, or underloved, in recent months and years.

“Most of the money coming into ETFs in 2021 are for broad asset allocation ETFs to support long-term investment goals,” he said.

Is there an ETF for that?

A relatively new product designed to protect against inflation has emerged as investors grow anxious about rising producer and consumer prices as the economy recovers from the pandemic.

Since kicking off near the start of the year, the Horizon Kinetics Inflation Beneficiaries ETF
INFL,
+0.17%
has gained over 15%. The ETF is Horizon Kinetics’ first and intends to give investors exposure to companies expected to be the beneficiaries of rising inflation — such as oil exploration and production companies, miners, transports, infrastructure and real-estate outfits.

According to CFRA the fund is now approaching $400 million in assets. It has an expense ratio of 0.85%. That means that the fund will cost investors $8.50 for every $1,000 invested.

Visual of the Week

It’s worth taking a look at the parabolic rise of meme asset dogecoin. The parody coin is up over 12,000% in 2021 alone. Its rise may explain why some investors are talking about bubbles forming in parts of the market. Is it a cautionary tale or a missed opportunity? Only time will tell.

The surge in the crypto does raise one key question: Will there ever be a bitcoin
BTCUSD,
+0.58%
ETF?

Market Extra: Top forecaster Yves Lamoureux sees a critical window of opportunity ahead for investors. Here’s where he thinks your money should go, including a crypto-linked SPAC he sees as preferable to Coinbase shares.

Securities and Exchange Commission Chairman Gary Gensler may offer some insights Thursday at a hearing before the House Financial Services Committee.

What we are reading in ETF land?

• Louis Navellier, founder and chief investment officer of Navellier & Associates, writing for MarketWatch, explains how to profit from ETFs’ quarterly changes and “outsmart the stock-market algos.”

• Bloomberg reports that wealthy Americans may be shifting to ETFs to try to avoid President Joe Biden’s plan to effectively double the capital-gains tax for those making more than $1 million a year.

Weekly ETF rap

MarketWatch has launched ETF Wrap, a weekly newsletter that brings you everything you need to know about the exchange-traded sector: new fund debuts, how to use ETFs to express an investing idea, regulations and industry changes, inflows and performance, and more.