Is This Frothy?

11/08/2024

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This week, Strategas ETF expert Todd Sohn takes a look at the historic surge of ETF launches and asks, “Is the ETF market getting frothy?”

Definitions:

The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.

An exchange-traded fund (ETF) is a pooled investment security that can be bought and sold like an individual stock.

Equity ETFs invest in a basket of company stocks (also known as equities or shares). They are the most common type of ETFs.

Fund flows represent the cash that goes into or out of companies, financial assets, sectors, or other market categories.

Assets under management (AUM) is the market value of the investments managed by a person or entity on behalf of clients. AUM is used in conjunction with management performance and management experience when evaluating a company.

A correction is a decline of 10 percent or more from an asset's most recent high.

A mutual fund is a type of investment that pools money from many people to invest in a variety of assets like stocks, bonds, or other securities.

Bond Exchange-Traded Funds (ETFs) are investment products that give you exposure to the performance of a diversified basket of bonds.

Leverage refers to using debt (borrowed funds) to amplify returns from an investment or project.

A share class is a designation applied to a specified type of security such as common stock or mutual fund unit.

The iShares Core Growth Allocation ETF (AOR) is a low-cost fund that aims to track a diversified portfolio of equity and fixed income funds. The fund's goal is to represent a growth allocation target risk strategy.

The bull/bear ratio is an economic indicator that measures the sentiment of financial advisors and planners about the stock market. It's calculated by dividing the number of bullish advisors by the total number of bullish and bearish advisors.

CFTC-regulated VIX futures are contracts that reflect the market's estimate of the value of the VIX Index on future expiration dates.

VIX futures are a way to speculate on the level of expected volatility. The price of a VIX future reflects the market's estimate of the value of 30-day forward volatility on the expiration date.

Froth refers to a market condition where an asset's price begins to increase beyond its intrinsic value. A frothy market is characterized by overconfident investors that ignore market fundamentals and bid up an asset's price beyond the asset's quantitative worth.

This communication was prepared by Strategas (“we,” “us,” or “our”), a brand that offers investment advisory services through Strategas Asset Management, LLC, an SEC Registered Investment Adviser, and provides research to institutional investors through Strategas Securities, LLC, a broker-dealer and FINRA member firm and an SEC Registered Investment Adviser. This communication represents our views as of 11/07/2024, which are subject to change, and presented for illustrative purposes only. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. All investments carry some level of risk, including loss of principal.

Strategas Asset Management, LLC and Strategas Securities, LLC are affiliated with Robert W. Baird & Co. Incorporated ("Baird"), a broker-dealer and FINRA member firm, and an SEC Registered Investment Adviser, although the firms conduct separate and distinct businesses.

The ETFs described herein are referenced solely for illustrative purposes and should not be construed as an investment recommendation. An investment in exchange traded funds involves risk, including the possible loss of principal. For important disclosures and risks relating to each ETF referenced herein, see each respective funds’ prospectus or contact your financial professional