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ETFs to focus on amid global supply chain issues

Tom Lydon, ETF Trends CEO, joins Yahoo Finance Live to discuss ETF picks protected against supply chain issues, infrastructure related ETFS, exposure to crypto space amid possibility of a Bitcoin ETF, and China-related ETFS.

Video Transcript

ALEXIS CHRISTOFOROUS: Time now for our ETF report, brought to you by Invesco QQQ. I want to welcome in Tom Lydon, CEO of ETF Trends. So Tom, good to see you. I want to get to a lot here, so I'm going to jump right in and start with these supply chain problems that we continue to see rippling across different sectors. Are there any ETF picks here or areas where you're seeing people concentrating their money right now?

TOM LYDON: Yeah, so a couple of things. We're all getting warned that if we want to be successful for Christmas shopping, Alexa, we have to start now. We live in Southern California, and it's just crazy the amount of tankers that are stacked up off the coast. So with more online buying happening earlier, we're definitely going to see those companies that make their money by online shopping, the Amazons of the world, do well.

ONLN, which is ProShares online retail ETF, that's something to take a look at for sure. And then also from a global standpoint, EMQQ, which has the vast majority of all emerging market online buying, this is another big winner to take a look at because we can't wait around till November to do our holiday shopping. It's going to start now. And numbers are going to see through that that's been happening.

ALEXIS CHRISTOFOROUS: Are you seeing money flowing into those kinds of funds recently, with all of the issues we're seeing with the supply chain?

TOM LYDON: Well, you are because what's happening is already in the stores. People are seeing that they can't get everything that they want. So, like in the early stages of the pandemic, I'm sure you did the same thing. Rather than trying to line up its stores or just get one item, as opposed to four, you go online to see if that can happen. It's not blocked things up because you go in a place like Amazon, it's going to tell you if it's available or not.

And then, for, you know, your son or your daughter's favorite gift, people are scared. So they're going online to find online opportunities, as opposed to running around to different stores. You've got to remember, online buying in the US, even through this pandemic, is only 16% of total retail sales. So there's definitely room for that to grow.

ALEXIS CHRISTOFOROUS: I want to ask you about what's happening in Washington, DC right now. There's supposed to be this vote on the bipartisan infrastructure bill tomorrow in the House. With still uncertainty swirling around this piece of legislation, are you seeing investors moving into ETFs that could benefit from the passage of such legislation?

TOM LYDON: We have, and we've been seeing that over the last year. This is one of the favored areas of financial advisors from 12 months ago. And there are about nine different ETFs that specialize in infrastructure. The leading performer has been Global X's ETF, infrastructure ETF. Ticker symbol PAVE, P-A-V-E. It's done really well because it just focuses on the US, number one. And also, I was watching when Biden was introducing this bill, the areas that he suggested that we needed help, which were roads, so construction companies, obviously. Railroads was a big favor to his as well, which are well owned within this ETF. So that's something to take a look at.

However, infrastructure is not just something that we're concerned about in the US. It's also a global issue. If you want to participate with global infrastructure, NFRA, which is offered up by FlexShares, is something to take a look at, too. More global participation there. So those are two choices and probably two of the best of the nine choices.

ALEXIS CHRISTOFOROUS: What about investor appetite for Chinese stocks right now? I mean, we know the debacle with Evergrande and the fear that that company may collapse. Are you seeing people taking on risk and moving into that area? Or are they staying away right now?

TOM LYDON: So first, we're always going to have struggles with China, whether it be regulatory, saber rattling, or what's going on with Evergrande. You know, I think the take is, it's not going to be one or the other. It's not going to be that the government is going to come in and rescue it. And it's not going to be that it's going to default. It's probably going to be somewhere in the middle. So we will get past this.

With that in mind, we've seen a lot of Chinese stocks and Chinese ETFs suffer. More broad-based ETFs if you feel like this might be a buying opportunity, MCHI, which is the iShares largest China ETF out there, that's something to consider. But getting back to technology and online buying companies, KWEB, K-W-E-B, which is a crane shares ETF, through this decline, has actually brought in billions of dollars.

There's a lot of smart money out there, thinking that this area of the market, the global market, can't go that much lower. So there's a lot of bottom fishing that's going on. So if you feel like China's always going to be part of our capital markets, we're always going to be entwined, we're always going to be competing, this may be that buying opportunity. And a lot of people are leaning in.

ALEXIS CHRISTOFOROUS: And finally, I want to get to that possible Bitcoin ETF, which I feel like we've been talking about forever. It looks like the SEC Chairman Gensler is warming up to the idea of approving a futures-based Bitcoin ETF. So what are investors doing in the meantime to get exposure to that space in the US?

TOM LYDON: Yeah, a lot of advisors and investors are looking for that, although there's Bitcoin and cryptocurrency in general is very popular. But many people go outside of their Fidelity and their Schwab accounts. They'd love to be able to buy it within their brokerage accounts. And that just hasn't-- there haven't been a lot of options there.

Up until this point, the biggest ETF for transformational data, for example, that is in that infrastructure space is BLOK by Amplify, B-L-O-K, something to take a look at. You not only have these transformational data companies, but you actually have mining companies, Bitcoin miners, that are publicly traded that are owned within this ETF. So as far as buying in your brokerage account today, that's almost one of the closest areas that you can come to it.

I feel strongly we may see something in a future-based ETF by the end of the month. Gensler, coming from the CFTC, likes the future-based strategy because it's regulated. And he also suggests in a 1940 Act wrapper because in the 40 Act funds, you need an independent group of trustees to oversee those funds. That would make him feel comfortable. And let's see if that happens.

ALEXIS CHRISTOFOROUS: All right, we shall see. Tom Lydon, CEO of ETF Trends, great to see you. Thanks so much.