ETF flows reveal what smart investors are buying now

Transcript:

Caroline WoodsJoining me now. Mo Haghbin, Managing Director at ProShares. Mo, thanks so much for being here at the desk with me.

Mo HaghbinThanks for having me.

Caroline WoodsSo let's start by talking about ETF flows, because you have some unique insights. Obviously at Proshares you get a chance to see where the money's going, where it's coming from. What are you seeing that might be surprising. Or maybe that goes against the market narrative. Sure.

Mo HaghbinWell, I mean, look, headline, we're having an incredible year in terms of asset gathering. It's going to be a record year for ETFs as a whole. But to your point, there are some trends underneath that I think are quite important. The S&P is up 16%. The Nasdaq is up over 20%. Obviously sentiment is pretty strong. But it's a very much of a defensive bull.

Mo HaghbinYou see the market leaders are actually the mega-cap companies that have larger profitability, very, very stable balance sheets, good return on invested capital. So it's not like the small cap mid-cap or cyclical stocks that are outperforming and seeing the flows. It's actually the bigger mega caps and the AI themes that are really outperforming.

Caroline WoodsIs that concerning or are there any signs that maybe we could see a we have seen a bit of a broadening out of the rally if you take a look at sector performance, but are there underlying signs that that defensive bull could turn into something that incorporates more of the market?

Mo HaghbinI mean, I think this is the question that's on everybody's mind. Every client I talked to is bringing this up. Are we, you know, overly concentrated. Are valuations stretched in certain segments of the market? For me, I kind of have a hard time seeing that happen in the short term. When you think about market concentration, I think it's really important to realize that today's mega-cap tech companies are not just one company.

Mo HaghbinThey're a conglomerate. Underneath that, there's several companies, and those companies underneath are not necessarily correlated. So like let's take Apple for example. You know they have hardware. They have you know, things like wearables, they have software. These things are actually not as correlated as you think. And maybe 20 years ago those would all be independent companies. For me, I think short term that I think will probably continue and markets will rally because of it.

Caroline WoodsBut the big question is is AI a bubble?

Mo HaghbinYeah.

Caroline WoodsYeah. Is there anything that suggests that investors think it is or maybe that they're not concerned enough?

Mo HaghbinSure. I mean, I think concentration from a practical standpoint is something we should all be paying attention to because weight is weight. So if there's a 7% stock weight in an index and that stock has an idiosyncratic event, that you're going to feel that the broad based indices will correct because of that. But to my earlier point, I don't think we're at bubble territory.

Mo HaghbinIt depends on what you compare it to. This isn't the 90s, right? Because profitability is a much different picture now. And actually, if you wait companies based on earnings and profitability rather than their market cap, I think it would tell a different story.

Caroline WoodsSo how would you characterize investor sentiment right now based on the flows data that you have?

Mo HaghbinI think investor sentiment is pretty strong going into the new year. I think where I would have some reservations or want to think about, asset allocation decisions are repositioning around two things. One, the employment picture is softened a little bit, and I think that's important for us to watch. That dovetails really, really nicely with the Fed's dual mandate.

Mo HaghbinAnd how is the fed going to respond. We have a rate cut in December that's fairly certain. And I think we'll continue to see the short end come down which is accommodative. That will support markets as long as the fed is easing. I think the equity market will continue to have strength and sentiment will continue to be strong, okay.

Caroline WoodsAnd large caps obviously have dominated the conversation this year for for many years, went for a decade. Where else are investors putting money to work outside of Mega-cap tech?

Mo HaghbinSure. Well, international actually, year to date has been a very strong, performance story, both Em and developed equities. The other thing I'd say is, you know, there are tools out there for clients that are thinking about more precise exposures or if they are worried about certain concentration, like, for example, in the tech sector, you can get broad based exposure.

Mo HaghbinWithout the tech sector, we actually offer products that remove certain sectors, for example, tech, health care. So if there's concentration or there's a view that a client has, we're actually seeing a lot of tools in the ETF toolkit to help them do that. I think international I'd say the concentration team is real. So diversifying to mid-cap small caps.

Mo HaghbinThe other area is alternatives right. And when we see this big trend where advisors are setting their policy benchmarks for alternatives is a lot higher than they historically have, the average advisor probably has 1 or 2% in alternatives. They're probably going to get to 5 to 10% over the next few years. And I think that's going to be an important theme.

Caroline WoodsJust quickly, what's the demand like for your ETF? That's the tech sector.

Mo HaghbinIt's actually seeing some flows year to date. And it's obviously kind of contrarian. Right. Because tech has performed really, really well. But as it's performed really, really well, I think people are thinking about how do I concentrate or how do I remove a little bit of that exposure. The other thing that's interesting about those sector products, I work in the financial industry.

Mo HaghbinI don't know if I need more financials exposure, right, because my income is tied to the industry. Those sectors allow you to get broad based exposure without the exposure of your income coming into your portfolio.

Caroline WoodsWhat's demand like for crypto related ETFs right now? Bitcoin is higher today, but obviously it's been a tough fall from the October highs.

Mo HaghbinIt's been a roller coaster ride. I mean we saw obviously the post-Trump rally very accommodative regulatory environment. Lots of positive sentiment with the genius act, for example, and other regulation that was supportive of crypto. We've also now seen, I think, what would be considered a pretty significant pullback, and de-risking, the flows tell a mixed story.

Mo HaghbinI mean, we saw actually flows come back this week. The news that Vanguard, I believe is, going to get into the crypto space was actually pretty positive for the market. So TBD. But I think overall we're we're seeing kind of a little bit of a mixed bag.

Caroline WoodsIt's TBD. I think that, you know, it's interesting. My editor, Matt, was making a point that he was thinking he's like, if any other asset class fell 30, 40% in a month and you're pretty, they would take the economy or parts of the economy down with it. Is that a sign that bitcoin and crypto doesn't matter? Because it didn't?

Mo HaghbinWell, from a market cap perspective, if you think about the total investable universe, it's only one, 1.5% of the total investable market. So does it really matter? Of course it matters. But in the in the big picture, I'm not sure it can bring down, the economy. And I actually think it's healthy to see this divergence between equity markets and crypto.

Mo HaghbinIt shows you that that correlation isn't as close as it has been more recently.

Caroline WoodsWhy is that healthy?

Mo HaghbinWell, I think if if markets were selling off at the same time that crypto was selling off, then your to your point there, there seems to be more leverage in the system. And crypto is actually creating negative, contagion within other asset classes. We aren't seeing that right. The equity market is having, you know, a pretty good week.

Mo HaghbinCrypto is having a pretty bad month. And I think that's healthy because those two things aren't necessarily linked.

Caroline WoodsOkay. So your advice to investors as they think about positioning their portfolios for 2020 2026 is what.

Mo HaghbinI think, you know, look at your asset allocation. Make sure that if you are finding areas within the portfolio where you're concentrated, look for ways to diversify that. I would probably stay pretty close to home in terms of the policy benchmark. So if you're a 6040 investor, I'm not sure you're taking a significant amount of equity risk relative to where we are with valuations in the market.

Mo HaghbinMakes a lot sense. But being short equities, I also don't think is a prudent, choice at the moment. So I'd probably be pretty close to home. Look for diversification opportunities, look for international, look for ways to enter other parts of the market beyond equities and fixed income to help drive income or total return.

Caroline WoodsAll right. We'll leave it there. Mo. Really appreciate your insights. Thanks so much.

Mo HaghbinThanks for having me.

Caroline WoodsThat's Mo Haghbin, Managing Director at ProShares.

This story was originally published by TheStreet on Dec 2, 2025, where it first appeared in the Video section. Add TheStreet as a Preferred Source by clicking here.