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We're less than two months away from knowing who will be the next president of the United States, and the stakes are high. Investors are trying to wrap their heads around all of the potential outcomes of November's highly contentious election, worried that it could disrupt their portfolios, but ETFs may offer a strategic solution to navigate some of that uncertainty. For more on how to position yourself ahead of the November 7th election, Jay Jacobs, who's the BlackRock US head of thematic and active equity ETFs, joins us now as part of this week's ETF report brought to you by Invesco QQQ. Jay, great to have you back here in studio with us. Appreciate the time, as always.

Glad to be back.

Let's dive into this, um, because you've you've sent over some really interesting perspectives here. First and foremost, there's a bit more sense that we're kind of getting right now about investors' appetite to be involved in more active ETFs. Why do you think that is right now?

Well, we've had an incredible run for just index strategies over the last 10 years. We've seen the S&P, we've seen the Nasdaq, we've seen, you know, really broad benchmark indexes perform very well, delivering all the returns that people could really expect from a broad market index. But now we're seeing more volatility, these bouts of major selloffs in the market. Uh, we're seeing a lot of kind of tactical rotations in the market between growth and value, back to growth, sector rotations. Uh, and frankly, we're just seeing more dispersion across stocks and sectors. And all of that really kind of lines up with having a stock picker behind the scenes able to navigate this volatility and dispersion can really help deliver better returns in the future, especially if broad market indexes can't deliver what they did over the last decade.

I mean, we've been looking at some of those broad market indexes here this morning, which have been rattled post CPI print and so, with two major events set to take place, and one of them going to be more long form, well, both of them pretty long form, but one of them in the Fed's cutting cycle that is expected to commence here in September, but then also you have the November election. Where have you seen some of the ETF strategy start to line up around those two major events?

Well, in two areas, I would say, you know, one, a lot of investors are still just trying to lock in yield right now. Uh, an ETF like BINC, which is managed by Rick Rieder at BlackRock, is really trying to capture high yield bonds, emerging market bonds, collateralized loan obligations, and really lock in some of those yields that can be, you know, 5, 6, almost 7%, so people can capture this high rate environment and hold on for a bit. Um, the other area where we're seeing more interest right now is actually a little contrarian to the market. It's looking at value stocks. So this has been a growthy market. In fact, growth is a huge part of the S&P 500 right now. Value is only about 22% of the index, the lowest it's been in 25 years. So contrarian investors are starting to see that actually, when there's less value in the market, there's actually more opportunity within value that portfolio managers and, you know, Tony DeSpirito at BlackRock with his BLCV ETF can actually make some really interesting moves that are very different from what you see in the broad market benchmarks.

Interesting. You know, we've talked so much at length about AI and all of the different ETF plays that are out there, and I was trying to figure out what is a more unconventional way that we can really think about access points into artificial intelligence without specifically looking at ETFs that are just based on the names that are directly impacting chips or, uh, some of the communications. And utilities came to mind. Is there an AI utilities play that you're seeing start to emerge right now in ETFs?

I I love this question because what you're doing is really thinking about kind of the second order impact of AI. You have kind of your immediate winners, but then you have this whole economy that has to be built and support artificial intelligence, including things like energy and electric electricity production. So absolutely utilities like IDU and Ishares are going to benefit from growing electricity demand. In fact, if we go backwards 15 years, electricity demand has not grown in the United States. It's been flat. You've seen more energy efficiency. You've seen, uh, you know, a shift away from manufacturing in the US, which is very energy heavy, but now you're starting to see that lift up, and utilities are going to make more money as they can sell more electricity. I think one other area to look at that's kind of adjacent to utilities is in the real estate space, which is data centers. These are companies that have pretty steady cash flows. They contract out basically renting their warehouse space for cloud computing and artificial intelligence compute for a long time. And so they both kind of get the stability like a utility of certainty of cash flows, but at the same time they they just get to command a huge premium right now because there's so much AI demand and not enough data center space.

It's interesting. You mentioned manufacturing. That triggered another thought. I mean, based on the ISM data that we had seen what, last week, manufacturing on the at least product side, that continues to be in contraction here. But if investors are looking for a rebound in that, how can they kind of track manufacturing as a theme via ETFs?

So, you know, manufacturing had been on the decline in the United States, but we're starting to see some forward-looking indicators that this could actually start to reverse. You know, one is manufacturing construction in the US has tripled over the last four years for reasons like the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, the Chips and Science Act, which is trying to bring more semiconductor manufacturing in the US, has really spurred more construction of factories and retrofitting of factories. So we built a specific ETF called MADE, like Made in America, which captures manufacturers in the US, everything from auto manufacturers to semiconductor, uh, manufacturers to, you know, good old fashion, you know, durable goods as well, really trying to benefit from this policy shift in Washington involving both political parties to support more manufacturing in the US.

Jay Jacobs, BlackRock US head of thematic and active equity ETFs, joining us here in studio. Great to see you, Jay.

Good to see you.