Buy these ETFs for the AI bull market! | Todd Sohn

Summary

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Full Signal Podcast — Episode Summary

Episode: Buy these ETFs for the AI bull market!
Date: May 12, 2026
Host: Phil Rosen
Guest: Todd Sohn, Chief ETF Strategist at Strategus

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Episode Overview

Phil Rosen sits down with ETF expert Todd Sohn to dissect today's hottest investment themes, focusing on AI, semiconductors, energy, and sector ETF trends. Sohn provides data-driven insights into ETF flows, sector rotations, investment vehicles for an AI-driven bull market, and cautionary notes on areas of frothiness and risk. The conversation explores parallels to the dot-com era, the potential changing composition of the S&P 500, and tactical ways to manage portfolio risk as volatility and record-breaking inflows reshape the landscape.

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Key Discussion Points & Insights

1. Record ETF Inflows Amid Market Rally

• ETF Flows as Sentiment Barometer:
  • April 2026 saw the second-highest intake in ETF history, reversing a "lukewarm, volatile" March ([00:34]).
  • Sohn notes how ETF flows reflect both "fast-moving sentiment" and a long-term structural shift from mutual funds to ETFs:
    "Month after month, we are setting some sort of record in the world of ETFs, whether it's flows, products, volumes. I suspect this will continue..." ([00:34] — Sohn)
• Mutual Fund Exodus:
  • Net flows to mutual funds are now negative; assets have shifted decisively to ETFs, with $15 trillion under management ([01:44]).

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2. Sector Rotation: Defense Out, Growth In

• Defensive Sectors Shrinking:
  • Defensive sectors (staples, healthcare, energy, utilities) are at a 35-year low — now <20% of the S&P 500 ([02:51]).
  • Sohn warns S&P 500’s lost diversification means “if I need to hedge or get more defensives, using the S&P isn't necessarily my way to do it.” ([02:51])
• Sentiment Reads & Market Leadership:
  • Risk-on, cyclical leadership dominates; the “AI era” has accelerated the fade of defensives ([03:51]).
  • In recession, expect defensives to bounce, but the AI-driven economy may alter historical patterns ([04:27]).

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3. Changing Beta: Energy & Tech as Opposites

• Energy Sector’s New Identity:
  • Once high beta, energy has become a low-beta, diversifying play, moving inversely to tech ([05:12]):
    "Energy is becoming the polar opposite of... growth, of tech. It's become low volume. At only 3% of the S&P 500, it's a diversifier now." ([05:12] — Sohn)
• ETF Vehicles for Energy Diversification:
  • Natural resource ETFs (e.g., HAP, T-U-R-F, CSNR, MGNR) offer exposure beyond pure energy, mixing in metals and mining ([08:13]).

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4. Industrial, Infrastructure, and Defense — AI’s Backbone

• Vertical Flows:
  • Semiconductors grab headlines, but industrials/infrastructure ETFs are seeing vertical inflows.
  • These flows are temperature, not always predictive:
    "The temperature towards this area is extremely hot. Everyone's in on it." ([09:39] — Sohn)
• Defense ETFs:
  • Heavy flows but mixed results, especially in European defense — “Are we getting over our skis?” Sohn asks ([10:42]).
• Macro Implication:
  • Infrastructure spending and defense could be the new normal if early AI-stage demand persists ([11:02]).

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5. Semiconductors Mania: Froth and Opportunity

• Record Trading & Momentum:
  • Semiconductor ETF volume is “going through the roof,” boosted by traders chasing hot trends ([13:04]).
  • Sohn’s caution: Have an exit plan or hedge with options if riding the momentum ([14:21]).
• Micron Example:
  • Massive run-up—“Micron is the 10th largest stock in the S&P 500 now … but do I think there’s some corrective risk?” ([14:35]).
  • Forward P/E remains “cheap,” but extreme momentum signals risk ([15:25]).
• “DRAM” Memory ETF’s Meteoric Rise:
  • Fastest ETF to $5B, even outpacing BlackRock’s Bitcoin fund ([21:04]).
  • Sohn’s advice: “Hard to say I want to chase it. But...have your plan right. Not the most timely idea.” ([22:10])
• Historical Parallels:
  • Echoes of the internet/dot-com bubble are hard to ignore ([23:10]).

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6. Degenerate Leverage: The Rise of 2x & 3x Single-Stock ETFs

• Leverage Proliferation:
  • 300+ single-stock levered ETFs now exist, but 70% are “zombie” funds (<$25M assets), trading on tiny volumes unless there's a major story ([16:21], [17:29]).
  • Popular names include TSLA, COIN, NVDA; “2x Micron MU was among the most traded ETFs today” ([18:16]).
• Extremely Risky:
  • Best for nimble, high-conviction traders on major catalysts—not buy-and-hold ([18:58]):
    "You need a trend to happen for these. ... It's all timing, not buy and hold." ([18:58] — Sohn)

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7. The Coming Space ETF Boom (and Gimmicks)

• SpaceX Anticipation:
  • ETF providers are rushing to launch “space” products in anticipation of the SpaceX IPO, but the sector is small and new products show lots of overlap ([23:58]).
• Questionable Index Changes:
  • S&P Dow Jones considering rule changes to accelerate big IPO inclusion. Sohn views this as “an eyebrow-raiser… an active decision” that blurs passive/active lines ([25:15]).
  • Caution on space ETFs: “Check the overlap” and watch for questionable inclusions ([27:20]).

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8. Current Favorites & Tactical Allocation

• Top Tactical Ideas:
  • Sohn prefers high-beta exposure, especially semis, but strongly recommends hedging (tail-risk ETFs, options, long/short alternatives, managed futures) as a “seatbelt” ([28:09], [31:06]).
  • Natural resources and commodities remain attractive for uncorrelated exposure ([28:09]).
• International Diversification:
  • Japan: Under-the-radar ETFs like OPPJ (WisdomTree), or staples like EWJ/DXJ. Broad and diverse sector exposure, plus Buffett’s endorsement ([29:24]).
• Avoiding Chasing:
  • Dramatic flows and momentum call for caution; “if you’ve been there or are long, just have your plan right. Not the most timely idea…” ([22:10]).

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9. Notable Quotes & Moments

• ETF Flows as Market Pulse:
  "To me, there’s two angles here. Flows can be a temperature barometer of investor sentiment... and there’s this structural move from mutual funds to ETFs.... ETFs have grown substantially. They're 15 trillion in assets..." — Sohn ([01:44])

• Defensives’ Disappearance:
  "Even 20 years ago defensives were 30 or 40% of the index... now that we're in this AI era, they have just all dissipated." — Sohn ([03:51])

• Energy's Changing Role:
  "Energy’s become a low beta sector. It’s totally collapsed relative to the S&P 500..." — Sohn ([05:12])

• On Semiconductor Mania:
  "If you're long, have a plan to get out, an exit plan, right? What's your stop loss? What's your pain threshold?" — Sohn ([14:21])

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Key Timestamps

• Broad ETF Inflows & Sentiment: [00:34] – [02:33]
• Defensive Sectors' Decline: [02:51] – [04:27]
• Energy & Beta Inversion: [05:12] – [07:46]
• Natural Resource ETFs: [08:13] – [09:13]
• Industrial/Infrastructure Flows: [09:39] – [11:02]
• Semiconductor ETF Surge: [13:04] – [15:44]
• Leveraged Single-Stock ETFs: [16:21] – [19:35]
• Memory ETF “DRAM” Launch: [21:04] – [22:31]
• Space ETF Proliferation & Skepticism: [23:58] – [27:38]
• Current Playbook & Risk Management: [28:09] – [31:06]
• International (Japan) Exposure: [29:21] – [29:50]
• Hedging Strategies: [30:00] – [30:59]
• Market Outlook & Sector Rotation: [32:19] – [33:07]

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Takeaways for Investors

• Momentum is Extreme—ETFs are setting records, especially in AI/semis, but froth demands caution.
• Diversification Is Shifting—S&P 500 is less diversified; defensives are out, cyclicals rule.
• Check Your Risk—If you're in high-beta areas, especially semiconductors, have a tactical hedging plan (puts, tail risk ETFs, non-correlated assets).
• Don’t Chase Gimmicks—Be skeptical of crowded themes (leveraged ETFs, space funds) and check for true underlying exposure.
• Global Opportunities—Japan remains attractive for its diversified sector mix and shareholder reforms.
• Seatbelt On—It’s still a structural bull market but Sohn emphasizes caution:
  "There's no doubt about that. But it can never hurt to have your seatbelt on and just be prepared just in case..." ([31:06])

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To Hear More:
Find Todd Sohn’s analysis at strategusasset.com, where he posts weekly ETF/market chart videos ([33:18]).

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Transcript

[A]

I am sitting down with Todd Sohn today. He's the chief ETF strategist at Strategus, and we get into his favorite opportunities in the market right now, why he likes semiconductors, what's going on with the froth and the AI trade, whether it compares to the Internet bubble, and much more. I hope you enjoy this conversation, Todd. We have this unbelievable chart I want to start with. On a broad index level, stocks are absolutely ripping, and I think a lot of that we can trace to monthly ETF inflows. And we're at a, a pretty close to record highs right now in April. What's going on here?

[B]

So April for Equity ETFs had their second highest intake in their history. Now, what's interesting about that is that's coming from what was a very lukewarm March. Right. You remember March was a month filled of volatility, geopolitical uncertainty. And so that brought down the temperature of investor sentiment readings, whether it's surveys, options, flows, and as soon as the market bounced and has rallied since, right back into the pool. So it speaks to A, how fast the market can move. Right. Trying to time things is really difficult, and B, the popularity of ETFs. Right. Month after month, we are setting some sort of record in the world of ETFs, whether it's flows, products, volumes. I suspect this will continue, but it's also partially because the market's doing so well. Right. Things are, as you said, ripping to new highs. As long as that remains, the word flows will remain elevated.

[A]

Do you think it's fair to look at a chart like this and point to, let's say, investors climbing the wall of worry against everything? If you were to boil it down to one chart, I would think there's a pretty good case to make it for ETF flows by month. Does that make sense?

[B]

Yeah, I think that's part of it. Flows. To me, there's two angles here. Flows can be a temperature barometer of investor sentiment and right when you're coming off of March's restrained reading. And then April is about reengaging the market as things turned around. And then the other angle is there's this structural move from mutual funds to ETFs over the last 42 years. Now net flows to mutual funds are negative. That's a massive change from the way people used to invest. And it's all largely gone to ETFs. Of course, there's some other vehicles out there, but ETFs have grown substantially. They're 15 trillion in assets, they're almost as big as mutual funds. So it's part the market doing so well and then part the preference of the way to invest. For plenty of investors out there, the ETF is just far easier and convenient for a lot of people.

[A]

Yeah, I think that makes sense. And one of the things exactly what you're talking about, this enthusiasm coming back in the market. You have another chart you shared that shows defensive sectors now represent less than 20% of of the S&P 500. What's the significance of this? What are we looking at?

[B]

So this is fascinating to me, right, because The S&P 500 is the most popular index in the world. It's the most tracked invested index around there. We all sorts of products or benchmarking and it always evolves, right. We are in a constantly evolving world. And what I find notable is that defensive sectors, staples, energy, healthcare, utilities, of which they've had their moments here and there over the last couple of years, when you take those and add them up, they're only about 18, 19% of the S&P 500. That's a 35 year low. In a sense this is all about relative strength, right? It's going to tech and growth companies. But on the other side, the S and P is becoming less and less diversified. It's not that it's a problem, but it now requires you to say, okay, if I need to hedge or get more defensives, using the S and P isn't necessarily my way to do it. Will this ever reverse? Who knows? Maybe, you know, energy's had its little bout, but it's too small to matter.

[A]

With defensive going down, is that also a read on sentiment? Could you just say people are getting more and more optimistic? So defensives go down?

[B]

Yeah, totally. This is, this is a reflection of leadership in the S and P. And there's been no leadership from defensives, largely speaking for the last few years. So it is part of the structural bull market for stocks risk on cyclical leadership. I just think it's amazing on how even 20 years ago defenses were 30 or 40% of the index was much different landscape and now that we're in this AI era, they have just all dissipated.

[A]

And help me understand this. If we were to swing economically to let's say, fall into a recession, would this chart start ticking in the opposite direction or am I thinking of it wrong?

[B]

No, you would think so.

[A]

Okay.

[B]

If we're to think about markets and how people act in panicky environments, they will likely buy more staples and healthcare stocks, maybe Energy and utility, traditional utility type stocks. So that should start to work again. But in a AI algorithm generated era, who knows. But anytime there has been a recession or some sort of financial event, those sectors are what people go to because they're looking for lower volume safety type plays.

[A]

Okay, I, I think that checks out tomorrow. Todd, this third chart you're going to have to help us understand here the collapse of Energies and its beta to the S&P 500. Why did you choose to highlight this one and what's going on here?

[B]

So beta is a measurement of how much a asset class moves relative to say the S&P 500. Right. It's basically a measure of volatility. And so for years energy pre, say 2020 was viewed as a high beta sector. Right. If the S and p was up 1%, energy would be up 2%. If the S and P was flat, energy be up 1%. Right. Expect more volatility from energy. And then since the first wave of inflation, now that we've transitioned more to semiconductors and tech, energy's become a low beta sector. It's totally collapsed relative to the S&P 500. So what I'm seeing is for days that tech is up, energy's down. For days that tech is down, energy's up. Energy is becoming the kind of the polar opposite of, of the S and P of growth of tech. And that's reflected in the beta. It's just a far different sector. It's become low volume. And as much as only 3% of the S&P 500, it's kind of this diversifier now because staples don't work, healthcare has been frustrating. Utes are in their own world in terms of thematic plays. Right. Power generation. And so you're left with energy as this way to play the geopolitical events that are going on or days when semis are not working. Right. It's very peculiar.

[A]

So what's interesting to me is that energy and tech, you're saying that their beta has sort of inverted. Yeah, Energy's still been a top performer this year. Is there any correlation between performance versus beta?

[B]

It depends on the environment. Right. So high beta has typically outperformed low beta this year in there's a high beta etf, sphb, it's a popular one that's predominantly technology type stocks. And that's going to be your semiconductors and whatnot. And then low beta has historically been staples, insurance, boring type utilities, your dividend plays, stable type companies. Energy has never really been a part of that and it should be because when you measure that beta versus the S&P 500. So I think if you're looking for lower volume type stuff or just something uncorrelated to energy, it's going to be energy or the technology. Uncorrelated to technology. It's your energy type plays going forward. I think that's where energy fits into a portfolio for folks going forward. I mean we'll see how the sector acts going forward. Got massively overbought, a lot of money chased it in this cooling off period. So I still think though it makes sense going forward, especially given what's going on overseas. We have no edge on that. But just purely the statistics of its lower beta, it's uncorrelated to everything else.

[A]

I mean if you look at the demand from the AI side, I think that's a huge tailwind for energy. The geopolitics, huge tailwind for energy. And I've talked to a lot of people, including yourself for months at this point that have been pretty bullish on energy going back to third quarter last year I think. So we're in this, we're in this interesting moment where the geopolitics I think scare a lot of people on the energy side. But, but I'm still pretty optimistic.

[B]

Yeah. And the other way to play it is if you're like okay, I don't want to go full blown energy, you can buy a natural resources ETF and that's going to be your mix of energy and materials and real asset type stuff. So you're not getting 100% energy, you'll get 30 to 40% energy and then bounce it off with all the metal and mining names too.

[A]

So that's like a straight of Hormuz play.

[B]

Not pure but it's more a. Expect more events like straight uphills in the future.

[A]

Right.

[B]

It could be a copper issue, it could be some sort of other industrial metal issue where there's supply shocks and ideally that helps the equities run up. So you're going to get the best of both worlds.

[A]

Okay, do you. Wait, can you share a ticker example of like what's an example of these HAP?

[B]

That's from VanEck Natural Resources, T U R F from t Rowe and CSNR from Cohen and Steers. Those are. Okay, two of those are actively managed. MGNR from American Beacon. Yeah, all these natural resource ETFs I think are the way to go if you're looking to play the energy material space.

[A]

You know, every ticker it's Unbelievable. Okay, Todd, you have this next chart here. Tech is pretty much getting all the headlines right now, right? Tech, AI, everything. But the data points to infrastructure and industrials actually picking up quite a bit right now. And you know, to me this makes sense because for AI to work and fulfill the promise of AI, we need a lot of power, we need a lot of infrastructure. What's going on here? You, you have two charts next to each other.

[B]

Yeah. Okay, so most of the flows and volume activity have been to semiconductors recently. Rightfully so. Right. That's kind of the center of the universe. The adjacent semiconductor play is the industrials. Right. The power generation type companies. Infrastructure, the building out of this whole thing. For me though, some folks ask, well hey, what else besides tech might be have some, some red flags in terms of sentiment, risk. And I do think it's industrials and infrastructure because the amount of flows that are going to these products is absolutely vertical. And I don't use flows. They're not a signal necessarily. But again, as we were talking about before, they're a temperature barometer. So the temperature towards this area is extremely hot. Everyone's in on it. You're seeing more types of ETFs come out focused on the power and infrastructure space. And then also part of that industrials flow is defense companies. So there's plenty of money going to defense, playing defense, ETFs. And yet stuff like European defense has really gone nowhere for a year. So I just wonder, are we getting over our skis in terms of that? Right. That's the risk for me.

[A]

I mean, I wonder also if we are in the early stages of AI. This might be the new normal, just having a huge boom in infrastructure, even defense. I know President Trump's trying to rebuild the Navy and military arms, so those to me it's not that surprising to see charts like this where the flows look pretty vertical.

[B]

Right? Yeah. I don't disagree with you. This is a change in the way the whole economy works. I guess I'm more near term. That could be like a three to six month period for all I know. And then what happens is the stocks can correct consolidate and then resume higher. Right. It's not like we're calling for the end of a structural bull market, of course, but when you're looking for just near term risk, what could cause a speed bump for some of these groups?

[A]

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[B]

It. It's going through the roof. And here. So here's the thing about ETFs. Every few months, an ETF becomes the center of the world, the center of the universe. Two months ago it was USO with oil, cybersecurity 10, 12 years ago, ark back in 2020. Even USO back then too, covered calls a few years ago, Gold last year, right. And so now we have semiconductors. And it's just these moments, people are trying to get onto a quick trend, right? Chase performance to some extent. And so for me, I see the behavior, the volume spiking in not only semiconductor ETFs that we all might use, but also the leverage space, right? So people are getting very aggressive. I have no clue any of this stuff ends, right? I mean, we're in a room right now. How many semiconductors are in this room? I don't know, a lot. Between the phones, the cameras, televisions, so they're clearly part of this world. But all the statistics out there, whether it's volumes, flows, performance, are at massive extremes. So what do you do if you're long, have a plan to get out, an exit plan, right? What's your stop loss? What's your pain threshold? Or use the options market to buy protective Puts, I think that's a great idea here just to protect your gains if you've been long or if you're chasing here right now.

[A]

I mean, what do you make of the bulls who say, look, even though, let's say Micron is up 700% in a year, the Ford PE is so cheap. Right. Because of the demand.

[B]

Right.

[A]

How do you think about that?

[B]

So I would go to our buddy Ryan Grabinski on this. He would say, yeah, the earnings support the story. And I totally agree. I'm not going to disagree with that. For me, it's more just about the timing mechanism of hey, are you buying it now that it's 150% above its 200 day average and that Micron is the, I think it's the 10th largest stock in the S&P 500 right now. Like a week ago it was number 20. And maybe it's deservedly so. But do I think there's some corrective risk just given how extreme some of these momentum characteristics are? Yes. So you let it reset like most other things that get too hot and take it from there. Right. You almost have to wait a quarter or two and again, if you're long, use the options market to protect or have some sort of stop loss and whatnot. This is all about keeping what you have.

[A]

Of course. I mean, to me, the bear case on Micron is more based on price action than the actual story.

[B]

Yeah, yeah. That's why I tell you the story makes sense to me, especially what you're saying about the earnings. And it's more just it's not a new idea. Every single person out there is talking about this.

[A]

Yes. Right now if you post any type of chart related to Micron, it almost immediately goes viral because everyone's got an opinion on it. For one, people, you know, all the bulls will just repost it and gas it up and say, this is so spot on. But then you have just as many detractors that say this is essentially and it's house of cards. So you have this other chart that I want to share. This might be the best chart I've seen all month. Levered long single stock ETFs. This is like the de degenerate chart here. What's going on?

[B]

So the levered long space is fun. I feel like I've shown this in different variations of where this is a category that's three and a half years old. We even talked about this. I always forget. But you can buy 2x leverage on certain single stocks and it's growing by the day, there's over 300 of them now, about 30 to 35 billion in assets, something like that. And now what's happening is issuers are going further and further down the cap scale to put leverage on names, which it can be rocket fuel, lotto ticket type stuff, but sometimes I don't even know what the tickers are. Now we're getting real fringe, which there's nothing wrong with that. I find it more interesting if I'm talking to clients and I say, hey, there's now a 2x levered product on one of your stocks that you thought might have been under the radar. It's not exactly under the radar anymore. But the challenging part for issuers though is out of those 300 or so, 70% of that industry is in what I would deem a zombie territory, basically less than 25 million in assets. You know, it's just an ETF that trades each day, but there's not much money tracking it until it turns into a story. Right. And there's some volume coming and volatility for the underlying name, if that makes sense.

[A]

Yeah. And we can see it in the chart. I mean, most of the dots are really tiny. Yeah, yeah. And you also have, you know, here we have a bunch of stocks for sub 10 billion names.

[B]

Yeah.

[A]

Which is not the microns. Right. 700 billion, 800 billion. These are names probably most people have not heard of.

[B]

Exactly. I mean, you're talking the more recent ones have to do a space like Sidu Space. S I D U I think might be the ticker. Never heard of it. I have no idea. So I don't. Those will just kind of live in their own zombie territory for a while. But what's interesting is Tesla, Coinbase, Nvidia have been popular among those. And now before I came here, 2x micron mu was among the most traded ETFs today.

[A]

Holy crap.

[B]

So people wait for the story, the catalyst to play out, and then they go the algorithms, whoever's doing this, if there is a 2x ETF, buy that one. So you might see a good example a few months ago was 2 x hims and hers. They had this massive volatility after earnings. I think it might have been down or up, probably down. And it collapsed. And then another time I think it actually went up 50, 60%. So these quick money traders look for this stuff.

[A]

Is there any case that you can make to buy into one of these? Other than a very near term momentum thing?

[B]

For me, no. If you have a extremely high conviction that Some sort of episode or catalyst is going to end up happening for a stock. That's it. But the waiting game is the opportunity clause. Right? Because if the underlying name just treads water and chops around, that's going to hurt the fund performance because of all the leverage built in and the swap exposure. So you need a trend to happen for these. So that's why if you have a very high conviction that maybe they'll beat earnings or some drug will be approved or some product will be a hit, that's when you have to play it. But it's all timing, right? These are not necessarily buy and hold instruments.

[A]

Yeah. These make me very nervous because they're, you know, some are like 300% moves per day or whatever. And it's so absurd because it's also capitalizing on, you know, the boom in prediction markets and the boom in which is coming draftkings and, you know, all these different apps that allow you to put bets on literally everything. Now we have it.

[B]

This is like that. You're going to get 2x memory ETFs. Pretty soon those are going to come out. So putting leverage on the memory stuff that's out there besides Micron, just by itself, the whole cohort of those 2x SK Hynix will be. There's a whole slew of those ready, getting ready for when they list their depository receipts soon. So more and more of this. Now they're a tiny, tiny sliver of the entire ETF industry. Right. Of 15 trillion, they're only 30 to 40 billion, but they get a lot of attention because they do such massive trading.

[A]

And it's also. 30 billion is not nothing.

[B]

It's not nothing.

[A]

A lot of people accounts.

[B]

Yeah. It is not nothing. And we can all go on our phone and buy them pretty quickly. So people like leverage because you can make a strong return in a very short amount of time. But it comes with huge risk.

[A]

Yes. It's unbelievable. Speaking of huge risk, the new ETF D R A M, the Memory ETF has Micron in it. Fastest. I think it was the fastest fund ever to. Was it 65.

[B]

5 billion? I think a billion. 5 billion.

[A]

5 billion faster than Ibit Blackrock's Bitcoin fund. How are you looking at this?

[B]

That's from our dear friend Eric and his team. Their stat. This is part of that. You know, when an ETF finds a moment, you got to get the right exposure at the right time. That's so hard to do. But the folks around how the good guys there were able to kind of get this one spot on. And they had an ETF ready for this memory explosion and the stocks have been phenomenal and that this is the result having one of the fastest out there. It also shows you. I don't know who's in it. Retail institutions, whoever's in there. But it just shows you how great the ETF is. The ETF vehicle because it's everybody in the pool. This is not some private vehicle where you have to have a high net worth and nobody's going to be able to get into it. This is for everybody. So everyone's riding along on this.

[A]

Do you like it right now Dram at these levels?

[B]

It's part of that whole semi volume going vertical. The names are trading extremely deviated from their longer term moving averages. It's hard to say I want to chase it. But again if you've been there or you are long, just have your plan right. It's not the most timely idea I think is the way to put it out there.

[A]

I have so many friends that have gotten in in the last few days and everyone keeps asking me is it too late to buy? Is it too late to buy it?

[B]

It may not be. It could go up another. Well, here's a stat. Bloomberg has a memory index which is kind of similar to the ETF. It's up about 500% or so year over year. Okay. Doesn't mean it can't go up 1000% over the next year. But it's very difficult to say that's fresh money. We could look back on this in five years and we'll be like wow, those guys were. That Todd was an idiot. It went up 2000%. I have no idea. I think this is just more about managing the risk of what's going on out there.

[A]

It's. I mean there's. It's so hard to avoid the Internet comparisons, dot com comparisons and even when I write about the memory stocks and in many ways, like I wrote a recent newsletter that said Micron is cheap compared to its forward earnings. So many emails back about me being stupid.

[B]

That's usually a good thing.

[A]

I think so. I think so. So okay, the. The last thing here, space. With SpaceX coming to public markets, this is a huge theme that I think is going to be a very big thing investors are going to be looking for exposure on. And you have this chart that essentially breaks down the ETFs in the space sector. I don't really see much a here. What are you looking at?

[B]

So okay, so we hit on Semis, we hit on the industrials and energy, like kind of the big stories in the market. Space is the remaining corner of that. And for me, I always find it humorous and whatever other adjectives you want to use that when ETF issuers start launching the same product over and over again, it's a little bit of a head scratcher. So everyone wants a piece of this SpaceX because it's going to be this massive IPO. Even though there's only a small, small percentage of the float going public, people want a piece of it. And so in the last two months or three months, we're now at, I don't know, 10 space related ETFs and there's only so many stocks in this industry. It's not this massively developed industry that's out there like consumer staples and discretionary. So there's going to be a lot of overlap between those ETFs and I don't know, all the stuff I see where index providers and exchanges are changing rules to make sure that this gets into their product is a little bit of an eyebrow raiser in terms of being a little bit cynical. Like I don't know about these breadcrumbs here in terms of the sentiment towards the space of. So I take those launches. Rule changing. The blurring of lines between passive and active is now happening, especially with S and P wanting to change their index rules.

[A]

Wait, can you explain that a bit more?

[B]

So S and P, Dow Jones, right, they run the s and P500. They want to, I believe they put out some consultation to say, hey, we might change some of our rules that have been placed for a long time in order to fast track SpaceX into the index. Right. The profitability rules, the length that an IPO trades for before it's allowed in or be considered. And so that's important, right, because we've had this benchmark that we've all relied on for decades and now they're all of a sudden start changing rules for these big IPOs that are coming, not just SpaceX, but OpenAI, Anthropic, whoever else is out. So that's an active decision to change some of the rules out there for an index that we all track, which

[A]

is it fair to say that's just a business decision by S and P? Because they want the biggest name.

[B]

Yeah. They want to be able to track a company that if an IPO is at 1 or 2 trillion, whatever the number is, they want the index to represent the American markets and economy. So you got to have that name in there, the they all. I mean, I also think that if you go back to five, six years ago, Tesla was not in the s and P500 for a while and then all of a sudden it gets entered in and there's this massive run up in Tesla. And for better or worse, Tesla's kind of been this giant trading range for the last five years. Since then that was almost its own little mini bubble. I think they're trying to avoid that again. So this whole space thing, it has these tentacles that are going into product development and how indices and providers, how their rules are. And I don't know, I'm a little skeptical.

[A]

I'd be very skeptical of buying into a Space ETF. I think I like SpaceX, but I know there's a ticker here. UFO for the Procure Space ETF. I wonder if that was timed with the government's release of UFO files. Like, I don't know, it seems very gimmicky.

[B]

That one's actually the original spaceflight. It's been around for a while.

[A]

Okay.

[B]

To their credit. To their credit. But it is funny.

[A]

50 holdings, it's a lot of stocks in there.

[B]

Yeah, yeah, it's. I think so if you're doing due diligence on these space funds. Right. Check the overlap. Right. What does the top of the stack look like? And then does it start to bridge out where it's like it's not really space, but maybe there's one particle of their business that deals with space somehow.

[A]

Like a stray Nvidia share or something.

[B]

Yeah, like, you know, Comcast could probably be found in some of these because they have satellites for their TV networks or something like that. I'm like, okay, it's space, but not. That's not rockets. Right. People want the rocket stuff and the space economy development, not the satellite television stuff. Huh.

[A]

Okay, so we've gone through a lot of charts here. A lot of verticals. Do you have a current favorite opportunity in the market right now?

[B]

So let's see. I think it's a great time to look at your high beta exposure semis in particular. High beta, right. Say, how can I hedge that? To some extent, just in case we hit some sort of speed bump, especially as we get into the midterm election season. That's always softer for markets. So I want to look at ETFs that have built in, put protection, tail risk ETFs. I want to look at natural resources, commodities. Commodities will be uncorrelated if this whole episode overseas stays intact. I Don't have a specific swing on a sector right now. Nothing really stands. As much as that might be disappointing, I think energy is still all right. Tech is doing its thing. Discretionary and Staples are both weak. Industrials are too enthusiastic. So I think it's a great time to look at high beta stuff and understand how to hedge. And then if I had to look internationally, we still like Japan for what that's worth. Now the argument against Japan is if oil streams elevated, they have to import a lot. But Japan does have the benefit of a very diverse market in terms of industrial tech and consumer exposure and financials, for what that's worth.

[A]

And you would get Japan exposure. Just etf?

[B]

Yeah, yeah, it's the easiest way. OPPJ from Wisdom Tree is an interesting one that's a little under the radar. People usually go to EWJ or dxj, which is nothing wrong with those which are good too. The WisdomTree Japan ETF has companies that are shareholder friendly and the companies that are a focus of Berkshire, by the way, because Berkshire has a big stake in some of these Japanese companies. So it's not a bad company to be with.

[A]

I'm going to look into this one. Can you share a bit more about maybe options to hedge? As you were saying, this high beta right now.

[B]

So it depends on the type of exposure, right? Do you want tail risk? You can go to caos from Alpha Architect, right? That's going to be a tail risk funds. You have these little puts built in for volatility. I go back to these natural resource ETFs, right, because they're going to be uncorrelated. To go back to this beta conversation about with energy, right? They're going to be less correlated because you have energy materials as opposed to tech. And then you could do something like Franklin. They have, I think it's flsp, it's Franklin style premium and it has a long short component built into it. And if you bring up the correlation of that to the S and P, I think it's negative too. So that'll be a little bit of a buffer during market declines. So it all depends on what type of hedge you want to go with. Pure puts, different equity or long short alternatives. And also managed futures. By the way, managed futures will be buying or selling based on different signals. There's a bunch of those in the ETF world that ideally during shocks they tend to work.

[A]

Okay, Todd, just based on the positioning you're talking about, is it fair to say you're more cautious in the months

[B]

ahead Yeah, I think that's fair. It's really a structural bull market. Right. There's no doubt about that. But it can never hurt to have your seatbelt on and just be prepared just in case. We've been on a massive run. I think the 3 are changing the S&P 500 in its top decile. It's been there. It's hard to sustain though for a while. And then you just look at some of the behavior in the semiconductors, as much as they are warranted, very extended. So you just want to have some sort of buckle on just in case things get bumpy and we have to reset here over the coming months. And I listen, I could be wrong, but that's just the way we're viewing it.

[A]

No, I think that's very fair. I just know we spoke in December on the show. You sounded more bullish at the time coming into the year than you do today, a quarter into the year.

[B]

Yeah, I think that's fair. I don't know. I mean it's. It's tricky because all the stuff driving the index is so extended and then you have these disappearing defensives and whatnot. And it's even translating overseas, by the way, like in emerging markets. Korea is bigger than China. Taiwan's the largest weight in EM now. That's a huge change from the last decade where it was always China. So this is all into the semiconductor type trade, huh?

[A]

Okay, last thing for you, the semis. If that gives way, let's say, and we start to lose ground on semis, what do you see? Picking up the slack?

[B]

Probably energy. Energy would make sense. I would love to see healthcare actually sustain a rebound. There was some signs of life earlier in the year and it has been the most frustrating sector for everyone at Strategus over the last two years. Biotech's been all right, but then equipment and managed care have been inconsistent. But healthcare is definitely something that's brought up in a lot of our meetings with clients because it's so essential to the market and the economy. It was a big sector. It's only some odd 8% now, but there's a lot of interest there for it to really come back.

[A]

Huh? I know healthcare was one of the bullish calls you, you made in December as well. You said you liked healthcare coming into the year. Todd, where can people find your work online?

[B]

So strategusasset.com I have a weekly video there going over 3 to 5 charts on the ETF in the market world and LinkedIn X obviously my name, Todd, sohn But Strategus Asset. For more information on all things Strategus.

[A]

Amazing. Todd. I know you'll be back very soon. Thank you again for your time.

[B]

You're the man. I appreciate it.