Home Markets Nadig appears on ETF Edge to talk emerging markets, value investing, crypto, and more.

Nadig appears on ETF Edge to talk emerging markets, value investing, crypto, and more.

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VettaFi financial futurist Dave Nadig joined Wes Crill and host Bob Pisani on CNBC’s Edge ETF to discuss a range of topics from emerging markets to value investing to cryptocurrency.

In recent weeks, $50 billion has poured into the market, largely backed by US stocks and fixed income securities. Nadig considers international exposure to be overlooked: “I’m concerned that US investors here are a bit overwhelmed in terms of national biases. It kind of worked for you because we had such a strong dollar, but I think when we think about positioning portfolios for the rest of the year, we have to think about international diversification.

From 2000 to 2009, US stocks were largely flat. During “the lost decade,” investors who had global diversification fared better, but Nadig says investors need to think beyond market capitalization when evaluating emerging markets. Pointing to Perthe Tolle Freedom 100 Emerging Markets ETF (FRDM), which explicitly excludes China and other countries with human rights concerns. “I think that’s a reasonable approach,” Nadig said. “It’s not just about whether you support their policies, it has to do with the rule of law and whether or not you are doing the same when investing in a Chinese stock as you are when investing in a stock. It’s reasonable to have different measurements there.

Valuable advice

Value investing has struggled during the pandemic, which has helped growth investing. “We’ve seen some interest in mid-cap value over the past few weeks here, but generally it’s either a broad asset class market, a thematic market, or a a growing market. The value hasn’t been able to catch an offer like some of these other things have,” Nadig said.

Dividends managed to steal the spotlight from value and became popular with investors. Crill notes that dividends can drop at any time and believes fixed income securities offer a less volatile and more efficient way to generate returns.

The single stock phenomenon

Crill views single-stock ETFs as risky, especially given the need for healthy, versatile portfolios that can help investors meet their retirement goals.

But many single-stock ETFs, including several Tesla-focused funds (TLSAs), have created plenty of volume. “Volume is the right word here. It’s not that they’ve accumulated a lot of assets, they’ve accumulated tons of volume,” Nadig said, noting that the funds essentially trade all of their assets under management every day, which means they are used as intended. “These are very sharp tools, though, if you’re a day trader or a hedge fund that really needs to make sure liquidity is important.”

When asked if they pose a risk to the market, Nadig said there is a world where the trading product gets all the play and the underlying stock stops trading. “This is where you might find yourself in a situation where complex rebalancing is driving prices down late in the day,” Nadig said. “It’s theoretically possible.”

Crypto still has a use

Pivoting to cryptocurrency, Crill does not view crypto as a solid return vehicle or risk mitigation tool, given its volatility. He wonders where it fits in a portfolio given that it doesn’t seem to play a concrete role. Nadig pushed back, noting that cryptocurrencies still have value as diversifiers. “I think a few percent acts as a big diversifier, even with this pullback we’ve seen,” Nadig said.

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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.

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