00:00Joining us right now is Jay Jacobs, U.S. head of equity ETFs over at BlackRock to talk a little
00:04bit more about some of the recent market moves.
00:06And, Jay, I do want to start off just in general with some of the flows and sentiment right now
00:10in markets.
00:11I know we've kind of gotten a little bit away from, I guess, that initial knee-jerk reaction to the
00:15war in Iran.
00:16And now I think people have kind of settled in with this idea, trying to parse exactly how long this
00:21goes on,
00:21and more importantly, the idea of whether there are going to be any real ripple effects for the U.S.
00:26economy,
00:26and for that matter, for U.S. corporate profitability. What are you seeing?
00:31Well, we can see it in some of our client polling data that previously clients had been much more bullish.
00:36In fact, over half of financial advisors in the U.S. were positioned bullishly just a few weeks ago.
00:41Now they're coming more into sort of a moderate, you know, wait-and-see sort of approach towards the market.
00:47That's really trailing flows towards a couple of areas.
00:50One is we're seeing a shift in sentiment from a little bit more away from the U.S.
00:54and towards international with some of our clients.
00:57And we're also seeing more of a focus on diversifiers in the portfolio, taking a little bit less equity risk,
01:03focusing on things like liquid alts.
01:05The third area is people looking at defensive positioning through option strategies,
01:09looking at buffer ETFs that can provide a measure of downside protection.
01:12So this isn't, you know, a risk-off environment.
01:16This is just a shift from more bullish positioning into a bit more moderate positioning and looking for diversification.
01:21Do you get a sense here that with some of the positioning shifts that we've seen,
01:25that they are going to be extended or, I guess, prolonged?
01:28Or is this a little bit more tactical, a little bit more short-term until that fog of war finally
01:34lifts?
01:35You know, I think some of these things that we just discussed are actually likely to be longer term.
01:40I think that if you look over the last several years, the heavy emphasis on U.S. equities over international,
01:45we're going to see the pendulum swing back a little bit.
01:47We're going to continue to see an emphasis on diversification, particularly as stock bond correlations continue to be high.
01:54And then I think you have a demographic shift of so many people entering retirement
01:58that just don't really want to see these bouts of volatility.
02:01They want to mitigate it when they can, and that's where those buffer strategies come in.
02:05So I actually think maybe this is because of, it's more of a near-term reaction,
02:11but I think a lot of this positioning might stay for the long term.
02:13Jay, you and I live and breathe ETFs.
02:16You have the largest AI ETF.
02:17The ticker is BAI.
02:20Where are you seeing the next phase of AI investments beyond the big names like NVIDIA?
02:25Well, we're seeing it happen right now with the broadening of chips, right?
02:28The memory chip crunch has certainly, you know, focused on other areas than just GPUs in the market.
02:34But we're also starting to see more adoption of artificial intelligence across the economy.
02:38So some of the areas that are really interesting are just companies that are adopting AI,
02:42using it to improve their products or improve their margins.
02:45And we're also seeing a lot of focus on power and power infrastructure.
02:48So really looking at the inputs going into data centers as a major way to play AI,
02:53but outside of the technology space.
02:55Your ETFs in the crypto land, IBIT and Ether, those are ETFs tracking Bitcoin and Ether,
03:00are seeing strong activity.
03:02What are you trying to get from that?
03:04What are you reading from your investors when it comes to conviction, when it comes to the crypto space?
03:10Well, the big news this week is we brought out a third product in the space, which is ETHB.
03:14This is our staked Ether product.
03:16So this is looking at, you know, not only providing the price return to Ether,
03:19but also some measure of income based off of staking that Ether.
03:22And it's been off to the races.
03:24We've seen, you know, on average over $45 million traded each day just since it launched a couple days ago.
03:29We're seeing some really strong flows.
03:30This is really about providing investor choice.
03:32We know that there's a lot of investors out there looking for digital asset exposure in the ETF structure.
03:38We've done it with Bitcoin.
03:39We did it with unstaked Ethereum, and now we're doing it with staked Ethereum.
03:43So this is really about expanding our product lineup, and there's been a tremendous amount of interest early on.
03:48Obviously, a lot of breadth, of course, under that BlackRock portfolio.
03:50I do want to go back, Jay, though, to the equity space and also this idea that some people have
03:54talked about with regards to the moves that we've seen in this market
03:58and the idea that people want a little bit less sector exposure, if you will, and more single stock exposure
04:04as well.
04:05Does that sort of work against some of your ETFs, or do you also sort of have something that can
04:11actually cater to those types of folks?
04:13Well, Romain, I would agree with maybe a little bit less sector exposure, but where it's going is more towards
04:18thematic exposure.
04:19People are looking at things like infrastructure, looking at artificial intelligence, looking at geopolitics, and these are themes that are
04:26not very well captured by using a sector-based approach.
04:29This is part of why we've seen billions of dollars come into our AI ETF, the AI, as well as
04:34you were mentioning.
04:35It's why we've seen a tremendous amount of flows into our infrastructure ETFs like IGF.
04:40People understand the world is changing, but the tools that you need to access those changes are evolving as well,
04:46and that's where thematic ETFs have really become a key tool in portfolios just in the last several years.
04:52So a lot of the structural themes that sort of existed prior to the war, whether it was the AI
04:57theme and even the alternative asset theme,
05:00obviously two themes that, of course, have had some cracks, to be sure,
05:03but you anticipate that those longer-term structural trends for those uptrends, I should say, that that is still relatively
05:11intact?
05:13Oh, absolutely.
05:14I mean, let's look at what's happened year-to-date so far.
05:16One of the big shifts has been leaving the tech sector broadly and moving into AI stocks in a more
05:21focused, thematic way,
05:23and this has really proven out with what we've seen with software stocks,
05:26which is just broadly buying the tech sector is not a very precise way of capturing the winners from the
05:31AI trade
05:32because in that basket, you might also find some companies that are likely to be disrupted by artificial intelligence.
05:37But taking a thematic approach that really hones in on the winners is a really important way to think about
05:42portfolio construction.
05:43And if you're doing thematic investing right, you're looking at the long-term, not just near-term news events.
05:49All right, Jay.
05:50Got to leave it there.
05:50Jay Jacobs, U.S. head of equity ETFs over at BlackRock.
05:53And we should point out, we actually did have an IPO today in the AI space, in the drone space,
05:58basically mashing up two worlds that investors have been salivating over.
06:02Swarm are selling at $5 a share last night, opening at $12.50.
06:05The shares halted right now at $2,906.
06:08A full breakdown of all of today's cross-asset market action with a global simulcast,
06:13a global simulcast that starts right now.
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