In this week’s ETFs & Markets video, Chief ETF Strategist Todd Sohn discusses:

• The blistering pace of equity ETF flows
• Cyclicals and Defensive sector ETF positioning
• The potential message from Bank Loan ETFs
• Loan related funds activity rising as spreads widen

Defintions:

S&P 500 – A widely used stock market index that tracks 500 large-cap U.S. companies across multiple sectors.

Equity ETF – An ETF that invests primarily in stocks, providing exposure to a broad market or specific sectors.

Sector ETF - A sector ETF is an investment fund that tracks a specific industry or segment of the economy—such as technology, healthcare, or energy—rather than the broad market. These funds hold a basket of stocks from companies in that specific sector, allowing investors to target growth in specific industries, improve portfolio diversification, or express a specific market outlook.

Cyclical Sector - Cyclical sectors are industries that thrive during economic expansions and decline during downturns, with performances closely tied to consumer discretionary spending and macroeconomic health. Key sectors include Consumer Discretionary, Financials, Industrials, Materials, and Information Technology. These companies often produce non-essential, "nice-to-have" goods.

Defensive Sector - Defensive sectors consist of industries providing essential products and services that can maintain stable demand regardless of economic conditions. These sectors feature low-beta stocks that offer consistent dividends and reduced volatility, perhaps making them ideal for cushioning portfolios during market downturns or recessions. 

Healthcare Sector - The healthcare sector is an economic grouping of industries, encompassing companies that manufacture medical products, drugs, and equipment, or provide healthcare services like diagnostics, hospital care, and insurance.

Industrials Sector - The industrials sector consists of companies producing capital goods and services for industrial applications, rather than directly for consumers. It includes manufacturing, construction, aerospace, defense, machinery, and logistics, often acting as an economic bellwether for business investment. 

Energy Sector - The energy sector is a critical, cyclical component of the global economy comprising companies involved in the exploration, production, refining, and distribution of fuel and power. It includes traditional fossil fuels (oil, gas, coal) and renewables (wind, solar, nuclear).

Tech Sector - The tech sector, or technology industry, encompasses companies involved in the research, development, manufacturing, and distribution of technology-based goods and services. It includes software, hardware (computers, semiconductors), artificial intelligence, and IT services. 

Bank Loan ETF - A bank loan ETF (exchange-traded fund) is a, usually passively managed, investment fund that holds a diversified portfolio of floating-rate loans made by banks to corporations, often with below-investment-grade credit ratings.

State Street Blackstone Senior Loan ETF (SRLN) - an actively managed exchange-traded fund that invests at least 80% of its assets in senior, secured, floating-rate bank loans, aiming for current income and capital preservation. It typically targets non-investment grade loans, often acting as a higher-yielding alternative to traditional bonds.

First Trust Senior Loan Fund (FTSL) - an actively managed ETF launched in 2013 that invests at least 80% of its assets in senior, floating-rate bank loans, predominantly from North American companies. It aims to provide high current income while mitigating interest rate risk, often holding below-investment-grade debt.

A Collateralized Loan Obligation (CLO) is a type of security backed by a pool of debt, typically low-rated corporate loans, that is structured into tranches with varying risks and returns. CLOs allow investors to gain exposure to higher-yielding corporate credit, with senior tranches receiving priority payments and lower, equity tranches bearing higher risk. A CLO ETF invests in securitized pools of leveraged corporate loans, offering retail investors access to institutional-grade, floating-rate debt. These funds provide daily liquidity, diversification across hundreds of loans, and potentially higher yields than traditional bonds with limited interest-rate risk.

A high-yield (HY) corporate spread is the difference in yield between riskier, below-investment-grade "junk" bonds and safer, benchmark securities like government bonds or top-tier corporate bonds. It measures the extra interest (often in basis points) investors demand for taking on higher default risk. A wider spread indicates higher perceived risk, while a narrowing spread suggests improved confidence. 

A premium/discount to Net Asset Value (NAV) measures the difference between an ETF's or Closed-End Fund’s (CEF) market price and the actual per-share value of its underlying assets. A premium occurs when the market price is higher than the NAV, indicating investor demand. A discount occurs when the price is lower than the NAV.

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. Information regarding market or economic trends, or the factors influencing historical or future performance, reflects the opinions of management as of the date of this communication, and are subject to change. 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. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. 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.