Next Gen Bitcoin ETFs, Refiners Outperform Broader Market | ETF IQ 4/6/2026
Speakers
Summary
- ETF flows showed resilience with $28 billion net inflows last week despite geopolitical tensions, led by S&P 500 ETFs like VOO and SPY M.
- SPY M is gaining on VOO in a fee war, with a 2 bps fee vs. VOO's 3 bps, attracting $29 billion year-to-date inflows due to cost efficiency.
- Bitcoin ETF landscape evolving: Morgan Stanley launching SBT at 14 bps, the cheapest yet, potentially sparking a fee war and leveraging its $6 trillion advisor assets.
- New crypto ETF varieties emerging, including active strategies and after-hours focused funds, indicating industry innovation and alpha pursuit in less-covered assets.
- Vaneck Oil Refiners ETF (crack) has outperformed broader energy ETFs over 10 years, with U.S. refiners advantaged by complex refineries and current Middle East conflicts.
- Leveraged oil ETFs like UCO and SCO are high-risk due to leverage and futures rolling, earning a red light in Bloomberg's traffic light system and warning against buy-and-hold use.
- USO, a plain oil futures ETF, also carries significant risk from rolling futures, which can erode returns even when oil prices rise.
- Credit ETFs face bearish views: Carson Block is short HYG and LQD due to AI job loss fears, predicting GFC-like fallout, but this is reported second-hand.
- Dave Braun of PIMCO is cautious on corporate credit, citing complacent valuations and growth risks from oil supply shocks, preferring securitized products like agency mortgages.
- Active management in fixed income is advocated by Braun, with data showing over 80% of core plus managers beat passive peers net of fee, and flows shifting towards active bond ETFs.
- Disagreement exists on credit ETF liquidity risks: Block fears illiquidity in a downturn, while Braun notes underlying bond liquidity has improved post-GFC.
- State Street's partnership strategy with firms like Apollo and Bridgewater aims to democratize institutional strategies via ETFs, focusing on credible managers and strong outcomes.
Trade Ideas
UCO and SCO are double-leveraged oil futures ETFs that involve leverage and rolling futures, earning a red light risk score of 10 in Bloomberg's traffic light system. Leverage and futures rolling create high costs and volatility, leading to significant losses over time, as evidenced by UCO being down 98% since launch. AVOID these ETFs as they are not suitable for buy-and-hold investing and carry extreme risk, designed only for very short-term trading. Short-term traders might profit from volatility, but long-term holders are highly likely to experience substantial losses.
USO is an oil futures ETF that involves rolling futures, earning a red light risk score due to associated costs, and historically, oil price gains have not translated to ETF returns. Rolling futures introduces contango and other costs that erode returns over time, making USO an inefficient way to gain long-term oil exposure. AVOID USO for long-term investment in oil due to structural inefficiencies and high risk, despite its appearance as a vanilla ETF. Short-term trades during specific market conditions might benefit, but it is not designed for buy-and-hold strategies.
Dave Braun states that PIMCO is "very light in corporate credit" and cautious on public credit due to valuations not commensurate with risks from oil supply shocks and growth impacts. Supply shocks to oil can lead to higher inflation, tighter financial conditions, and weaker growth, hurting corporate credit performance, as historical data shows. AVOID the finance sector, particularly corporate credit, as it is priced to perfection with significant downside risks in the current uncertain environment. A dovish Fed pivot or rapid resolution of conflicts could support credit markets and offset bearish pressures.
Up Next
This Bloomberg Markets video, published April 06, 2026, features Eric Balchunas, Dave Braun discussing UCO, SCO, USO, XLF. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Eric Balchunas, Dave Braun · Tickers: UCO, SCO, USO, XLF