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This ETF manager’s tactical models are ‘as bearish as they could possibly be’ as markets grapple with a ‘dangerous’ mix of rising rates and high inflation

Hello! This week’s ETF Wrap spotlights how two ETFs are tactically positioned as they outperform a U.S. inventory market grappling with a “dangerous” mixture of excessive inflation and rising rates of interest.

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High inflation and rising rates of interest are a “dangerous” combine for an costly inventory market, in line with Meb Faber, chief govt officer of quantitative asset supervisor Cambria Investment Management.

“Our two tactical models right now are as bearish as they could possibly be,” Faber mentioned by cellphone. He was referring to the rules-based methods utilized by the Cambria Value & Momentum ETF
VAMO,
-0.70%

and Cambria Global Momentum ETF
GMOM,
+0.14%
,
each of which have held up comparatively properly in a brutal 12 months thus far for the U.S. inventory market.

Looking on the holdings of the Cambria Global Momentum ETF, he mentioned that “the vast majority of the portfolio is de-risked and in cash and bond-like instruments,” with a small publicity to pure sources and vitality positions and a “value-spread trade into managed futures.”  

Read: ‘Managed futures are like pigs in mud’: This ETF manager is replicating hedge-fund strategies to pull off big gains as stocks and bonds drop this year

The Cambria Global Momentum ETF’s holdings as of Sept. 21 included publicity to the iMGP DBi Managed Futures Strategy ETF
DBMF,
+0.21%
,
a fund managed by Dynamic Beta investments, or DBi, that has skyrocketed this 12 months. The iMGP DBi Managed Futures Strategy ETF is up round 30% this 12 months based mostly on Thursday afternoon buying and selling, in line with FactSet information.

Meanwhile, the S&P 500 index
SPX,
-0.84%

has tanked 20.5% this 12 months by way of Wednesday. Shares of the Cambria Global Momentum ETF have fared higher, down 4.2% over the identical interval, FactSet information present.

“Usually it looks like a globally diversified fund, but it’s pretty rare for most asset classes to be declining at the same time,” Faber mentioned, pointing to losses in U.S. and worldwide equities in addition to declines in bonds and actual property. “There’s really nowhere that’s looking particularly safe other than hanging out in short-term Treasurys and a little bit of the energy complex,” he mentioned.

Read: S&P 500 sees its third leg down of more than 10%. Here’s what history shows about past bear markets hitting new lows from there, according to Bespoke.

This 12 months shares of the Cambria Value & Momentum ETF have seen a modest acquire of two.8% by way of Wednesday, in line with FactSet information. The fund, which invests in U.S. shares and should hedge the portfolio, was down 0.6% Thursday afternoon, FactSet information present, eventually examine.  

The Cambria Value & Momentum ETF holds shares which can be cheaper than the S&P 500, in line with Faber, who additionally serves as Cambria’s chief funding officer.  “The value opportunity is one that we think could make an enormous difference for a very long time in equities,” he mentioned.

The Cambria Value & Momentum ETF doesn’t have a lot small-cap publicity presently, mentioned Faber, including that its prime sector positions embrace vitality, supplies and financials, with “a pretty low” allocation to know-how.

The U.S. inventory market was down Thursday afternoon, extending sharp losses seen Wednesday after the Federal Reserve introduced one other massive rate of interest hike of three-quarters of a share level whereas signaling that it’s going to keep aggressively tightening its financial coverage to tame excessive inflation. 

Shares of the SPDR S&P 500 ETF Trust
SPY,
-0.84%

had been down round 0.3% in afternoon buying and selling, slipping as rising Treasury yields weighed on the inventory market. Growth equities had been broadly struggling greater than worth shares on Thursday afternoon, in line with FactSet information, eventually examine. 

The yield on the 10-year Treasury word
TMUBMUSD10Y,
3.714%

was surging 18 foundation factors to round 3.69% Thursday afternoon, whereas the speed on the 2-year Treasury word
TMUBMUSD02Y,
4.126%

jumped 13 foundation factors to round 4.12%, FactSet information present, eventually examine. That’s after two-year Treasury yields climbed Wednesday to their highest charge since October 16, 2007 based mostly on 3 p.m. ranges, in line with Dow Jones Market Data.

Meanwhile, Invesco QQQ Trust
QQQ,
-1.23%
,
which tracks the Nasdaq-100 index, was down 0.8% on Thursday afternoon, FactSet information present, eventually examine. The ETF, which gives publicity to progress and tech shares, has plunged greater than 29% this 12 months based mostly on afternoon buying and selling.

As regular, right here’s your have a look at the highest and backside performing ETFs up to now week by way of Wednesday, in line with FactSet information.

The good…
Best Performers

%Performance

iShares MSCI Brazil ETF
EWZ,
+3.07%
3.0

abrdn Physical Silver Shares ETF
SIVR,
+0.11%
2.4

iShares Silver Trust
SLV,
+0.17%
2.4

iShares Latin America 40 ETF
ILF,
+1.51%
2.1

Invesco DB US Dollar Index Bullish Fund
UUP,
+0.13%
1.4

Source: FactSet information by way of Wednesday, Sept. 21, excluding ETNs and leveraged merchandise. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or better.

…and the unhealthy
New ETFs
  • Carbon Collective Investing announced Sept. 20 the launch of the Carbon Collective Climate Solutions U.S. Equity ETF
    CCSO,
    -2.10%
    ,
    an actively managed exchange-traded fund that invests in firms devoted to fixing local weather change.

  • The Newday Sustainable Development Equity ETF
    SDGS,
    -0.81%
    ,
    an actively-managed fund that invests primarily in firms adhering to a number of of the seventeen United Nations Sustainable Development Goals, started buying and selling final week, in line with Newday’s website

  • Strive Asset Management said Sept. 20 that it launched the Strive 500 ETF
    STRV,
    -0.91%

    to supply diversified publicity to large-cap U.S. firms. The agency will use shareholder engagement to press firms to deal with their mission as a substitute of “someone else’s social agenda,” in line with the assertion.

Check out: Republican lawmakers likely to target ‘woke capitalism’ after the midterm elections, analysts say

Weekly ETF reads

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