The strong dollar has jumped 7% since the start of the year. However, while Microsoft has concerns, VettaFi VP Tom Lydon is aware that investors can still make money from the greenback’s rise. He expressed those thoughts and more during “Claman Countdown” with Liz Claman on Fox Business.
As Lydon explains, investors can invest their money in almost anything with ETFs, including currencies. He continues: “We have seen, in times of uncertainty, that most investors tend to go to currencies in which they have more confidence, and the dollar is right at the top of the list.”
Many have moved cash or short-term money in ways that can overcome some of these inflationary concerns. With CPI above 8%, people can actually invest in the dollar if there continues to be volatility throughout the Invesco DB US Dollar Index (UUP) Bull Fund. It is up 6.5% this year and more than 13% over the past year. UUP has proven to be a great way to diversify the portfolio when it comes to inflation and security concerns.
Looking at what is setting this money in motion, markets below the 200-day average are showing signs of stability. Moreover, after 30 years of falling interest rates, bond markets are under pressure. Additionally, inflation and commodity trends were the strongest in 40 years.
how it flows
In terms of ETF flows year-to-date, led by the SPDR S&P 500 ETF (SPY)the iShares Core S&P 500 ETF (IVV)and the Vanguard S&P 500 (VOO), US bond ETF flows were negative in the first quarter, but investors are seeing a less hawkish Fed. The threat of a bigger-than-expected interest rate hike is less of a concern as most believe the Fed is more worried about pushing the country into a recession than the need to fight inflation.
Additionally, more money was invested in commodity ETFs than in US fixed income ETFs in the first quarter. FAANG stocks, along with Microsoft and Tesla, make up 25% of the S&P 500 weighting, but all have underperformed the index year-to-date.
As for other funds to watch, Cathy Wood Ark Innovation ETF (ARKK) continues to attract assets as investors seek to profit from the massive decline in innovative tech stocks over the past year. Although having recouped a lot, it has increased by 19% in the last four weeks. In addition, China-focused KraneShares China Internet ETF (KWEB) is up 30% over the same period.
For more news, insights and strategy, visit VettaFi.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.