Market Commentary — April 18, 2022

Most of the big players in the ETF industry were in Miami last week for Exchange: The ETF Experience Conference at the Fontainebleau. There were some great sessions and it was nice to see colleagues in person again. Not too many masks, but lots of hand sanitizer for the vaxed or negative testing crowd. I will recap some of the highlights below, but first here’s a brief recap of the market week.

Corporate earnings season is underway including JP Morgan who missed Wall Street estimates. Value stocks continue to outpace their growth counterparts, but small caps regained some ground relative to large caps. Energy shares continue to outperform. And the market was abuzz with Elon Musk’s $54.20 bid to buy Twitter.

Producer price inflation (PPI) came out, rising 11.2% YOY in March on a non-seasonally adjusted basis, the largest increase since the data was first calculated in November 2010, following an increase of 10% in February. The imbalance between robust demand and constrained supply continues to elevate prices. With a new wave of lockdowns in China and the war in Ukraine raging on, inflation seems anything but transitory. That being said, Core CPI, excluding food and energy came in slightly below expectations, with things like used cars showing signs of price improvement.

Inflation and how the Fed will navigate a soft landing with interest rates and balance sheet reductions was a hot topic at the ETF Conference. Bond King Jeff Gundlach of DoubleLine Capital, who mentioned this was not a great time to be known as a “bond king”, predicts that a recession is likely in 2023. He noted that if CPI was still calculated like it was in the 70s during the Carter years, the inflation number would be double-digits.

Another hot topic at the conference was pending industry regulatory changes and of course the likelihood and timing of the approval of a spot Bitcoin ETF. Keynote speaker Pippa Malmgren predicts crypto and DeFi will catalyze an economic transformation on par with the Industrial Revolution.

ARK Founder Cathie Wood was front and center at the conference, for two sessions, including an hour-long one-on-one interview with CNBC’s Bob Pisani in which she pushed back at critics and defended her investment process and commitment to disruptive innovation. It should be noted that ARK was also one of the largest sponsors at the conference, which is not surprising given their new Florida headquarters.

There were lots of new ETF managers at the conference, or not new, just new to the ETF space like Capital Group’s American Funds, who had a large booth as did crypto manager Grayscale, who is hoping the SEC will approve their application to convert its GBTC Bitcoin Trust to a spot Bitcoin ETF in July.

The award for best conference swag goes to the PIMCO’s coaster wireless chargers, with the second runner up going to State Street for its travel jewelry box. State Street’s booth also had a cool virtual reality experience taking attendees on a journey through investment risk. Like real markets, it made many people who tried it queasy, especially after a few days of conference revelry.

All-in-all, the Conference was a great industry event and attendees seemed genuinely happy to be back in person. Until next time, Miami, and here’s to more conferences ahead!

Jane Edmondson
CEO and Co-Founder

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