ETF Think Tank Director of Research Cinthia Murphy joins Wealth! to discuss the growing relevance of commodities and commodity-exposed ETFs for investors.
"We're seeing a lot more commentary from the market experts, the analysts, about the importance of commodities and the opportunity in commodities, which has been a segment that's typically under-owned in the advisory channel. It's under-owned by most investors, and it's at attractive positions right now because they're so overlooked so often, especially in the middle of a tech craze."
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- Well, gold hitting a record high this morning amid growing tensions in the Middle East. And speculations about the US interest rate cut pathway. Investors appear to be moving into what are traditionally considered safe haven assets. So can you include commodities into your portfolio? Let's bring in Cinthia Murphy who is the ETF Think Tank director of research to discuss more. This is part of our ETF Report brought to you by Invesco QQQ.
Great to have you here once again with us, Cinthia First and foremost, the commodities ETFs-- how much of a bid are they catching now that we're seeing some of these new all time highs or the new highs in gold?
CINTHIA MURPHY: Hi, Brad. They're finally hitting everybody's radar. I mean, as you know, people look to commodities when they're trying to hedge against inflation, when we're looking to diversify portfolios. But in the last year or so, it's been all about big tech. So people have paid very little attention to the diversifiers because everybody was trying to ride that tech wave.
And this year, that's starting to change. So we're seeing a bit under commodities, we're seeing a lot more commentary from the market experts, the analysts, about the importance of commodities and the opportunity in commodities, which has been a segment that's typically under owned in the advisory channel, it's under owned by most investors. And it's at an attractive positions right now because they're so overlooked so often, especially in the middle of a tech craze. So this has been an interesting moment for these types of investments right now.
- It's particularly interesting, especially given some of the concerns that we've had really murmuring about now, and a loud murmur, about the economy and the likelihood of a recession and where that has actually perhaps fueled some demand for assets like gold. How have you been evaluating that?
CINTHIA MURPHY: So if you look in gold specifically, I mean, there's been a lot of conversation about central banks around the world buying gold. I think 2022 was a record year for central bank purchases, 2023 was a really strong year as well. And so far in 2024, we're seeing central banks-- China, India, Turkey, all coming in and buying gold.
So they're doing that-- typically, they do that for, what, to diversify their reserves, they do that for safe haven that doesn't carry any kind of credit risk. And it suggests just a general concern about the state of the geopolitical state of the world, things are tense out there. In the US specifically, there's not a lot of telltale signs of a lot of trouble at the moment.
If you look at the VIX-- I was talking yesterday with the folks at yield max who are experts in the space. And they're pointing out the VIX, which is the fear gauge for the US economy, it's really calm. It's suggesting there's not a lot of fear out there, which is kind of an interesting dynamic of all this geopolitical risk, all this bid in gold and commodities. And yet the VIX is kind of calm. So it's a really interesting market right now where the truth is it suggests that nobody really knows what comes next.
- It was interesting in our meeting this morning. One of our top producers, aside from gold, was really excited about uranium. Give us a sense of why, especially considering some of the outperformance we've seen in both gold and uranium compared to the S&P 500 and the QQQs year to date.
CINTHIA MURPHY: So uranium has been quite a story. I mean, both uranium and gold have outperformed the S&P 500 and QQQ this year, which is a crazy statement. It's been the resurgence of the nuclear energy story. Since that disaster in Japan years ago, it's been a space that nobody wants to touch. Nobody wants to talk about it.
And all of a sudden, there is nuclear energy is the cleanest kind of energy. And so there's been a resurgence in the space. There's a lot of power plants coming back online. There are a lot of projects to build, new power plants around the world for nuclear energy. And uranium is key to that.
So we've seen a big run up on that, and we're seeing demand for exposure to the space because I challenge you to find somebody who's bearish on uranium right now. Everybody's extremely bullish. The technicals are strong if you're a technical analyst. The fundamentals are solid because the future is clean energy and nuclear energy is a big part of that story.
And in the advisory space, if you look at the latest tracking site ETF global survey, it lists nuclear energy as one of the biggest themes advisors are interested in, right up there with crypto and AI, which is telling if you think about the importance of the theme right now.
- Thank you so much for joining us here, Cinthia. Always a pleasure to get some of your time and insights. ETF Think Tank director of research, Cinthia Murphy. Thank you.
