ETF Edge - SPAC Spigot Slows & WisdomTree's Momentum Move

Episode Date: July 12, 2021

CNBC's Bob Pisani spoke with Jeremy Schwartz, Global Head of Research at WisdomTree Asset Management, Mark Yusko, Founder and C-I-O of Morgan Creek Capital Management, and Andrew McOrmond, Managing Director at WallachBeth Capital. They discussed the battle between growth and value and the tug-of-war between fundamentals and market cap-weightings in the world of ETFs. Plus, the sea of SPACs may have quieted for now, but what’s ahead for the second half? Will we see a resurgence even as the IPO market picks up steam? In the 'Markets 102' portion of the podcast, Bob continues the conversation with Jeremy Schwartz from WisdomTree. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge Podcast is sponsored by InvescoQQQ, supporting the innovators changing the world. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights in all things, exchange traded funds, you are in the right place. Every week, we do interviews, we do market analysis. We break down what it all means for investors. I'm your host, about Pesani. Today on the show, we'll talk about not only the battle between growth and value,

but also the tug of war between fundamentals. and market cap weightings in the world of ETFs. Plus, the sea of SPACs may have quieted for now, but what's ahead for the second half? Here's my conversation with Jeremy Schwartz, Global Head of Research at Wisdom Tree Asset Management. Mark Yuscoe, he's the founder and CIO of Morgan Creek Capital Management, and Andrew McCormon is the managing director at Wallach Beth Capital.

Wisdom Tree has just launched its growth and momentum ETF symbol WGRO. That seeks to capture the upside of aggressive growth, with lower drawdowns on volatility. Let's talk to the man in charge, Jeremy himself. Jeremy, this growth and momentum ETF, it's an attempt to combine technical and fundamental factors and capture the upside of aggressive growth with lower drawdowns. It sounds like a pretty tricky maneuver.

Can you tell us a little bit about how this is working? Yeah, there's really two components, as you point out, there's the growth and the momentum component, and there's challenges with both sides of those equations with the way people traditionally do. both factors. When you think about growth stocks, you often worry about people paying too much for growth. Certainly it's been a fantastic decade, even longer, 15 years for growth over value and sort of the faying trade in particular, like the largest stocks in the S&P. But when do those,

you know, is there a way to think about better timing on when you get in, when you get out of the stocks? We worked with a group called O'Neill Global Advisors. Bill O'Neill is one of the originally pioneers of growth investing, looking for stocks and strong. long-term uptrend, strong earnings growth, strong sales growth in rising trends, but that have pulled back recently, and so give you a better entry point. And also it's way to think about the exit point, when things get overheated and there's too much crowding in a name, they try to find the time the exit as well. And so it's a really unique way of, we think, we'll manage a drawdown risk, as you said,

on traditional growth stocks. And for momentum, we think about the momentum factor. Most academics talk about momentum as a monthly type of sort, and then you have the largest index from MSCI only rebalances twice a year. It really gets stale very quickly. And so we think we're solving a unique challenge on growth and momentum with a great partner with the global advisors. And we're putting up the ownership. I always like to look at the top 10 stocks because often in some of these, it's 30, 40, 50 percent of the weighting. But this looks fairly equal weighting.

I mean, I'm looking across the board here, and it's an interesting collection of companies here, Generac, N-Faze Energy, Roku, CrowdStrike, Decker's Outdoor, Pinterest, L-brands. There seems to be a mix of technology, which is about equal weight with the S&P. Consumer discretionary seems to be a bit overweight in this situation. I know generally how you're describing this is an equal-weight situation, but it's an intriguing group of stocks that are here. Some of these are decidedly mid-cap stocks, for example. Yeah, and so it is a factor-wading process that does feel equally weighted because of the way factor-watings tend to work. This also is one, as I mentioned, we'll have a monthly rebalance. It's going to be rebalancing again this week

so that mix of stocks can change by the end of the week. So it's one of those things that you have to constantly check back to see the latest orders. But that's what a momentum fund that is trying to trade around the edges and find those better entry and exit points will do. So, yeah, that speaks to how the power of this new updated process, that momentum trends will be changing. They're trying to capture, you know, those long-term winners that have pulled back recently at each monthly rebounds. Yeah. Andrew, your thoughts on this. I think obviously people have been interested in growth and momentum for a long time. But waiting by growth has a problem, you know, eventually value might outperform, for example.

Yeah, they're working together right now. I mean, I think it's interesting, Jeremy, you said that, you know, you're not getting, you have to buy growth on the dips. When are you getting a dip in growth? I mean, we had a one and a half percent correction last week for an hour and a half, you know what I mean, for two hours. So that is going to be challenging. Obviously, getting the rebounds every month will help you with that. So I think that limits the potential upside only in like, because everything is growing right now. But I am a believer that we could have a pullback, a little correction, or certainly a correction of stocks, meaning growth is going to come out of favor.

and that monthly rebound should help. And, of course, the equal weighting, like I said, will dampen the drawdown. Jeremy, this issue has been debated for a long, long time, this whole issue of how to weight these. Jeremy Siegel, a dear friend of mine, who's an advisor on your board, has had a tremendous influence on me,

intellectually in the last 20 years, has been arguing about this for a long time, about market cap weighted indexes versus fundamentally weighted indexes. And I explain to people that you can do this a lot of different ways. You can do it by earnings growth. You can do it by dividends. You can do it by momentum, sales.

I've seen all sorts of slice and dices on this. I guess the question, and maybe you can lay this out for our audience, is there any evidence that weighting by fundamentals, for example, works better than weighting by market capitalization? And if so, what fundamentals really do matter? No, when Professor Siegel looked at the original research behind dividend weighting and earnings waiting, I was working with him on the future for investors that came out in 2005. This was the aftermath of the tech bubble, and he was trying to solve for how do you correct

for large bubbles and large mispricings across time. And that was his real challenge was, you know, you had 10 stocks with triple-digit PEs in 2000, and he was calling, you know, big cap tech back then in 2000, the suckers, but what was his all-time greatest calls. towards value investing and rebalancing back to fundamental is to help solve for that bubble. Now, you know, cap weighting does incredibly well in these growth-oriented markets that you've had for the last 15 years. So really where fundamentals start to work is when things get really dislocated. You know, the more the markets run, the more expensive the markets get.

You hear about the show-or-K ratio getting towards really elevated levels. That's when thinking about an earnings approach will help you lower the P.E. 20 to 30 percent. In small caps where you have 30 percent of the Russell 2000 not profitable today, you can get a 13 to 14 PE ratio when you wait by earnings when you get much larger multiples in traditional indexes. So it really comes back to those long-term dislocations in the market where rebalancing to earnings and dividends would be helpful. You know, this leaves my head spinning, frankly. It's very difficult to figure out. So just looking back, long-term research, and Professor Siegel has done this, indicates that, for example, small caps tend to outperform big caps over long periods of time.

Value tends to outperform growth over long periods of time, and we're talking decades now. And yet, neither one of these have worked particularly well in the last six, seven, eight years. We've seen the opposite actually happening. So what's a reasonable investor to conclude at this point? Should we wait towards just growth as we're doing here in momentum? Should we push more towards value under the theory that we're going to get regression to the mean? What should an average investor do who's trying to figure this out? I think if your average investor is 35 years old, then they can stay the course with the market cap waiting if they're going to retire at 65 and a half.

But if you're 60 years old right now with valuations where they are, as they pointed out, and it's Jeremy's research, you don't want to be on the wrong side of that trade when it happens. So it really has to come down to like your time horizon. The small cap point you made is great. Why do small caps outperform over time? Because small caps become midcaps, and then they become large caps. So you're on for that entire growth cycle. But can you afford to be on small caps now at 62 years old? And what about the companies that don't make it?

Can you wait? And then large cap, which when you have market cap waiting, right, how many small caps are up there at the top? You have a more stable value-orientated stock that pays dividends that protects on drawdowns, right? But this particular ETIP we're talking about is it's fine for someone that's young. You're going to get all that growth and upside, right? And I believe the expense ratio is more than reasonable to justify being in this ETF to be ready for some kind of downturn as well. You know, Jeremy, if Jack Bogle was here, the founder of Vanguard, who I knew well, and who berated me many times for putting too much emphasis on active management, I can't help but think that he would say, you know, Bob, you want to buy value? Knock yourself out.

But may I point out that if you just would have owned the S&P 500, you'd be up 13%. so far this year. You know, there is an argument to be made that the average investor, even I have trouble figuring out these factors and what matters and doesn't matter in the long term, there is something to be said about some kind of simple indexing. Even if you can argue that fundamentally waiting might be better than market cap waiting, the S&P is still no slouch here. You know, you could own the world in one single fund, right? You could buy the all-world equities and not do a thing, and that could be all that you do. And that's a a very reasonable approach. It'll give you the market's returns over a very long period of time.

And so then the question goes, well, do you believe there are things that can do better and outperform the market? And, you know, I do believe in that fundamental waiting process that manages valuation risk comes back to fundamentals once a year. Intuitively, you know, on a bond, the yield is the return. On stocks, the yield in some ways is the return. The inverse of the P ratio, the earnings yield is a way to think about. expected returns, and that could help you rebalance back to those valuations. But if you believe in factors like

momentum that systematically trading around this on a monthly basis can outperform, and the O'Neill team has been doing this for 50 years, there's good evidence to try to overweight certain factors in portfolios as well. I have to say, I knew Bill O'Neill. He was a wonderful

man, and I respected him a lot, and when people ask me, you know, the biggest problem people have is they don't have a method. They'll sit and listen to people, and they'll start investing, around, but they don't have any systematic investment methodology. They want to try active investing, but they don't know how to do it. And that's the death, that's a certain death. Right, because in essence, they're following momentum with no discipline.

Bill O'Neill had a method. You cancel them, as you heard Jeremy mention it, but it's basically a bit of technical analysis combines with a bit of earnings growth. I'm simplifying a lot. But at least it's a methodology. And when people used to ask me, is there a methodology I should follow? I said, look, I'm not in charge of dictating a methodology to you, but if you want to look at one that's been consistent over a long term, look at investors business

nelly and look at Bill O'Neill. At least that makes some sense to me if you're going to be an active investor. And Jeremy, I know you've been, this particular ETF follows those principles, which is why I thought it was so intriguing. I want to move on a bit, and Jeremy, please stick around and give us your comments on the next topic. And Andrew, you as well. But I want to just move on and talk about something else that I think is very, very interesting. that has been out there. And that's what's going on with the whole SPAC business. I want to bring in Mark Yusko, who runs a well-known SPAC ETF, and we have been following this for a while now, and we've had Mark on many times to discuss this with him and what's been going on with this particular end of the business here.

Mark, I guess the question here is very simple. Spack started really strong in the first quarter, and then sort of just fell apart in the second quarter, died rather dramatically here. I guess the question here is what happened. The conventional explanation is that fear of a threatened SEC rule change on war and slowed SPACs down rather dramatically. But does that really explain everything? Can you just sort of tell us where we are with the SPACC? What happened in the second quarter and your thoughts on the second half? Yeah, Bob, again, thanks for having me back and great to see you. And I think the biggest challenge in the space is the confusion between SPACs and post-MACs and post-MACs. And I think the biggest challenge in the space is the confusion between SPACs and post-merger combined entities, right? Spacks have been doing what

SPACs do, right? They get raised in an IPO. They're a blank check. They go out and find an acquisition. They find an acquisition. They actually shouldn't trade at a big premium during that period because you basically own cash and treasuries. And then you get to choose, as an owner of the SPAC, whether you want to participate in this growth company. Our ETF is actually called the SPAC originated ETF. We invest two-thirds of the money in post-merger combined entities, which are no longer SPACs. People talk about them as SPACs, you know, Virgin Galactic, a lot of it in the press today with Richard Branson making his trip yesterday. It's not a SPAC, right? It's been DSPACD. Draft King's not a SPAC. So I think that's part of the challenge. Look, first,

quarter, there were 300 of 400 IPOs were SPACs. That was a little bit too much. The SEC threatened some changes. They haven't actually done anything, but threatened some changes in accounting, which was a distinction without a difference. There was no cash impact. And so the issuance of SPACs went down in April, to your point. It dropped to about 20% of IPOs that month, up from 75% in the first three months. Now we're back after June and July to about 50%. That's where I think we should be. I think the SPAC merger will become the preferred method of going public for high growth innovative companies, what we call the companies of the future. And I think that's where we are today. And I think if investors can differentiate between SPACs, which are pools of cash awaiting a

deal, and post-merger combined entities, which is basically a way for the average investor, which had been locked out of late stage venture capital for decades because it was a walled garden where only the rich could play, you have a chance to build a portfolio of these companies to the future. And you have to look over decades, not days or weeks, when you're thinking about that. Right? I always use Amazon, right? 24 years, public company, when was the right time to sell it?

Never. But it's had five drawdowns greater than 50%, two drawdowns, greater than 90%, it's drawn down every year, including this year, double digits, on average 31%. But it was building something of the future. So that's what you want to do. You want to build a portfolio of these companies of the future. Yeah. Your thoughts here.

Now, one thing, we had a chart. We just put up there. There's a couple of SPACs that are out there. Mark runs one of them, SPAK. There's another one, SPCX, slightly different that's been holding up a little better than the SPAC. Can you tell us the difference there? So I'm a big fan of both these products and Defiance for bringing this to light. It is two very different products, actually, as he enlightened to.

The Defiance product is a long-term investment. Like he said, most of the companies are post-merger or a decent percentage of the companies are post-merger, so then you're betting on those companies. There's a simple reason why that's struggled. Valuations are too high. This is a great, both of these are great tools to let the retail investor or even the investor that's just simply not accredited. You can be experienced and not accredited. Get the chance to get involved in something that's pre-IPO. However, we've had a long run in the last 10 years of companies taking too long to go public.

So even by whether they go IPO or whether they go SPAC, by the time they get there, the valuation is so sky high, especially in the last quarter, that you have underperformance past the merger. So if you will have a long-term time horizon by all means, then the defiance. The other product is quite simple. It's actively managed. and it can get rid of the holdings when they go at the merge. And if you're just the chart, it hasn't really moved. But that will also have its time.

I know that manager well, and what he's seeking to do is get the pop. Like if Stevie Cohen says, I'm coming with an ETF, there are pops in these things ahead of what they anticipate will be the company. The last point I want to bring up is... The key point you're making is SPCX is essentially pre-merger. Pre-merger, right. Right. And SPAC is largely, not completely, post-merger. And what I like about both, since we're doing an ETF show, it's ETA.

If you're talking about single-stock risk, let's talk about single SPAC risk. And I'm sure it defines would agree with me. There's plenty of it. Certainly there's risk in buying a SPAC before you even know the merger. So I would go to that EETF. If you like a company after the merger, go ahead. But if you don't like a particular feeling, I like the defiance. And, Mark, the average deal size for SPACs in lightness, it continues to climb slowly.

Is that a proxy for quality? Is that mean? Obviously, the concern people have here is a lot of stuff got public through SPACs, 300, as you note. And people are concerned if we get a 10% downturn. Whether it's a traditional IPO or a SPAC is absolutely a proxy for quality. And the size of the average SPAC has been rising. The size of the average IPO has been falling. And there is information content there.

If you look at the portfolio of post-combined entity portfolio companies on the whole over the last two or three years, they have done extraordinarily well. I mean, one of the challenges is, look, 20 years ago, SPACs were the NIT tournament of investing. You didn't want to go there, right? They were where you went if you couldn't get public. Today, it's the best high-growth companies coming public early. and there's a chance for you to participate. The reason you would buy a SPAC out of the IPO of the SPAC itself and hold until the deals announced

is if you think the sponsor is good at picking companies because then you're buying in at a discount from the ultimate transaction price. So that's why I think you want to own the pre-merger combined SPACs. Post-merger combined entities, that is all about the growth companies of the future. And the primary difference between our ETF and the other one is ours is actively managed, the other is passively managed, its capitalization weighted. And the conversation you were just having, one of the challenges of capitalization weighting versus active management is in a bull market, in a liquidity-fueled market, capitalization waiting will always win because it's dumb. And I don't mean unintelligent.

I mean, it's rule-based. It must buy more of things as they go up in price. As they rise. The one thing capitalization weighting will always do, though, and it has done this historically every single time, it will make sure that you are maximally exposed to exactly the wrong thing at exactly the wrong time when the environment turns. So when liquidity goes out, think back in 2000, you were in maximum exposure in a cap weighted index in tech. 2008, maximum exposure to financials. Today, maximum exposure to tech.

Value versus growth, that will close. If you go back to 2020, it closed in a hurry. And when the jaws finally do close, they will close. So we really prefer active management today, particularly in trying to evaluate high-growth, innovative companies of the future. Providing, Jeremy, and I want to bring you back in for the final word here, that you can do it at a cost-effective manner. I mean, of course, this is – I hate to bring up Jack Bogle again,

but his central insight was you can have very good active management, but usually the alpha is destroyed by the cost of trading and the taxes and the fees that are involved here. And I know you, at Wisdomy, make an effort to try to keep those fees low. I think we're 55 basis points for this particular fund for WGRO. Yeah, and I think in the spirit of what Mark was just saying, in this space, you know, being active, in this higher growth area, the innovation area and the SPAC area, I think the parallel with Mark is having that active management, I think, can be very useful. I agree with Mark on that. And, you know, I think in terms of this growth equation, having a process that can adjust,

and in our case on the growth in momentum name, being able to get in and find the right entry points and then also manage risk on the way out, I think that's very important in these supergrowth momentum-type names. And so that's the spirit of the methodology behind WGRO. Right. We would call WGRO, would you call that actively managed or would you call rules-based? How would you define that? Technically, you know, in the eyes of the SEC and everything, is an index-based strategy. It's tracking the O'Neill Growth Index.

But the spirit of it with a monthly rebound is probably one of the most active ETS in the market. It will probably have the most turnover in the market, even though it is tracking a rules-based index. You know, because we do the same thing, and we equally weight the portfolio, have roughly the same number, average position size, around 2%. It's really equal weighting versus capitalization weighting. That's the big difference, right? If you buy the S&P 500, 5, 6% of it's going to Apple, whether you think that's a good buy or not. And there's no choice, there's no decision, there's no thought.

With an equal weight portfolio, you've got more opportunities for rebalancing, and that monthly rebalancing, we have a similar cadence to our port for our ETF, I think, is really important. Yeah, good point there. Now it's time to round out the conversation with some analysis and perspective to help you better understand ETFs. This is our market's 102 portion of the podcast today. We'll be continuing the conversation with, of course, our friend Jeremy Schwartz, the global head of research at Wisdom Tree. Jeremy, thanks for sticking around chatting with us a little bit more. I wanted to ask you about the fee wars. You know, Wisdom Tree's stock itself is a little bit of a proxy for the ETF business.

And we saw it drop in the last couple of years and come back. fortunately, but assets under management for the ETAF business keep growing every year, and yet there is considerable fee pressure on this whole business here. We used to call it a couple years ago the race to zero. That seems to have abated a bit, but I wonder if you can give us your thoughts, just watching the ETAF business, how you would characterize the pressure and whether it's lessening at all on the ETF fund families. You know, I would largely say in some ways it hasn't changed since we launched.

you know, we just passed our 15-year anniversary from when we first launched in June of 2006. And if you think about it, some of the very early funds, like the original Spider family, was at nine basis point. So it's not like it started as this high-fee industry where there was, you know, the difference between nine basis points in zero is not that much. So in some ways, you know, for beta, you know, beta, yes, it's going close to zero. But where we've always tried to compete is really trying to provide, relative value on top. You know, you're trying to actually provide better risk-adjusted

performance. Perhaps you're trying to provide higher levels of income. And so, you know, in some ways, it's not that different. I mean, I'd say for Wisdomtree, you made some comments on our company. Today we're around 74 billion globally, 45 billion in the U.S. and about 30 in Europe. I'd say, you know, we're as diversified as we've ever been as a business. We have, when you round out from what we've done. We started as an equity group. We had acquired ETF securities over in London, and so today we have, you know, 20% in gold, 10% in commodities. And, you know, for the current market environment, I couldn't be more excited about our positioning really as a firm in the sense that we are talking a lot about inflation pressures and sort of a sustainable increase inflation,

not this transitory inflation, and having that commodities gold. In addition to being equity heavy, I think is actually a very good position for the firm. Now, some of your biggest funds are dividend-weighted. I'm wondering how you feel about the direction of dividends these days. The S&P yield, I looked at it the other day, 1.3%. That's near 20-year lows right now. The payouts are still high. It's not that they're dropping.

The prices are high, too, so it's been pushing the yield down. I'm wondering how you feel about that. Should companies be increasing the payout ratio? How does this payment of dividends right now balance out again? for example, buybacks in terms of distributions? Well, that's exactly the right point on the comparison of dividends and buybacks. I mean, the tax code generally incentivizes firms to do buybacks, and now you have as much, if not more buybacks than dividends on an annual basis.

So the net buyback yields would actually be higher. The amount that the companies are returning to shelters is higher than just the dividends. You know, I do think, though, we have a dividend-weighted process. You can buy the 14,300 dividend payers in the U.S. weighted by dividends, and that spread in terms of when you go from cap-wading to dividend-waiting is probably the highest. It's been in the 14, 15 years now we've been live. And so there is a meaningful increase going from cap-wading to dividend-waiting.

So I think that is some extra reason to look at it today. I'd say also, though, when you think about the, the alternative market to income, you know, really stocks, we say, are super tips, tips being inflation-adjusted bond yield that you get. You know, when you look at the one point, you know, one-and-a-half yield you're getting on the 10-year, you know, that doesn't account for inflation. There's the inflation-adjusted securities that are getting negative 60, negative 70 basis points for the 10-year tips. And when you see the long-term dividend growth has been 2% ahead of inflation over 60, 70 years, you know, you really compare it to tips, and that spread is still

attractive, which is, you know, why people still go to stocks. Yeah. You know, maybe this is a better question for Jeremy Siegel, my old friend here, because it's a little bit wonky, but I'm wondering how the fundamentals have changed here. So it used to be that stocks reflected a future cash flow, a future stream of earnings represented by dividends. But if the money is being diverted from dividends, but if the money is being diverted from into buybacks, how do you account for that on a fundamental basis? Is that an issue or should people start using buybacks and dividends as a way to look at accounting for future cash flows? I'm just wondering on a fundamental basis.

And we've talked about this. I helped him with future for investors, and we had a big section on buyback versus dividends, and really how in theory they're the same. You know, there's some different tax consequences, but in pure theory, terms, there's really not much of a difference between buybacks and dividends, even though buybacks have this reputation that gets attacked by the media and the politicians a little bit, that firms don't have anything better to do with their capital, that they're buying back their shares. So in some ways, I do think, yes, you need to track the net buybacks as another form of distribution,

just like the dividend yields. And that's where you think about international markets, people often look at they have much higher dividends in the U.S., but when you look for dividends and buybacks combined, you know, the number is actually much closer because of the tendency of U.S. companies to do more buybacks. You know, when you don't pay the dividend, you have to trust the capital allocation, and you could say, you know, Warren Buffett is one of the prime examples, right? He's never paid a dividend practically. And, you know, he actually started to buy back his own shares recently,

signaling that he thought his stock was cheap. And, you know, he has a tough rule for when he thought, you know, his stock was trading below intrinsic value. I guess the problem I've got with the buyback story, is, is it just, are you really reducing your actual amount of shares outstanding, or are you just doing a revolving door for options for people who are at top management? I have seen the latter, as well as the former. I've seen share count reductions, but I've also seen people just do a gigantic revolving door that doesn't really reduce it. And I have a problem with that, frankly. I know

I'm editorializing a little bit, but you understand the difference to me. If you've got a cash flow, I'd rather get it in dividends if all you're going to do is just, you know, divert money for buybacks to pay out in options for your upper management. No, and there's truth to that. I mean, if you go back to when did, you know, Microsoft is what tech companies have the ultimate reputation of using a lot of stock options. And, you know, when Microsoft paid its first dividend back in 2003, 2004, it canceled its stock option policy and gave everybody restricted stock.

So there is this connection between buybacks options, compensation for management. I think you're exactly right that there's some relation. But, you know, we, if you go to our, we have a fun comparison tool that has great data on net buybacks and gross buybacks. And so we show it both ways. And, you know, we have data going back. And you can see it's been a pretty consistent, there is some of that differential,

and there is more gross buybacks than net buybacks, obviously. But companies are still returning net cash, you know, and it's been over 1% to 2% on average for much of the last decade. And I think that trend is to stand. And so that is to say they are doing more than just offsetting the options. Yeah. I agree.

On a gross basis, yes, I agree. Let me just, before I let you go, your other big area of investment is in currency hedging, and you've got the Europe hedged equity, ETF, HEDJ, you've got the Japan hedged equity, ETF.

Briefly, your thoughts on the direction of the dollar. You know, I think generally the notion has been, And, you know, tactically, you know, the deficit spending we have in the U.S., the higher inflation we expect, generally has been a baseline view that you could be in a weak dollar period. And I think some of the position has that. I think everybody was positioned for that. So just recently in the last few weeks to months, it's become a strong dollar period. We have a managed futures fund that sort of rotates tactically every month, and that actually just went long the dollar on some of those momentum trends. turning higher. I think, you know, the way I thought about currency from a portfolio perspective,

most people take too much currency risk when they go overseas, that, you know, you buy European stocks, not because you want to bet on the euro going up forever. It's just that you think the stocks are attractive diversifiers. And I think that, you know, being hedged actually could lower your volatility compared to being unhedged. And so I think strategically more people should have a plan in place, stick to that plan. Roughly, you know, 50-50 hedge is not a bad baseline of where you go international, hedge-unhedged. And if you have a view to go different than that, that's when you could tactically rotate. But the one thing I wouldn't do is be unhedged all the time and just bet on the dollar collapsing forever. I don't think that's a good bet. Yeah, that seems to be a real problem.

And I, you saw you guys had quite an impact with that Europe-hed equity and the Japan-hed ETF. as well. Jeremy, thanks very much for joining us. Always appreciate talking to you. Jeremy Schwartz, folks, is the global head of research at Wisdom Tree. And thank you for joining us. InvescoQQQQ believes new innovations create new opportunities.

Here's the greater possibilities together. Learn more at investco.com slash QQ Invesco Distributors, Inc.