Here’s where retail investors are moving their money

Transcript:Caroline WoodsRetail investors aren't just along for the ride anymore. They're driving market leadership. And the Retail King ETF shows us exactly where the money is going with a focus on momentum and participation. Joining us to break it down is Sylvia Blonsky, chief investment officer at Defiance ETF.’s Sylvia, great to have you here at the desk.Sylvia JablonskiThank you so much for having me. Happy to be.Caroline WoodsHere. All right. So defiance just recently launched Retail Kings in partnership with Futurism. Yes, I think it's important. Let's be clear right out of the gate. This is not a I'm a meme ETF. This is not Reddit pumps. But what is a retail king.Sylvia JablonskiYeah a retail king is you know, you and I were talking a little bit off camera about this, but there's so much interest by the retail community now in trading and investing. And in some ways, the retail community has become the smart money of the world, right. And institutions are trying to follow what they're doing. And so these are the stocks that retail are talking about.These are the conversations that they're having. But also we should define retail for us. In this case retail is that's $68 trillion of wealth transfer. Is is the generation it's going to that's retail right. It's kind of like millennium gen next gen X, Millennium Gen Z and beyond. Right. That will inherit some of this wealth transfer. And they are actively stock picking and following the trends of tomorrow.And so what we retail queens does is we look at companies that have IP, they have some special technological secret sauce, they're talked about by their competitors. The hyperscalers are interested in what they're doing. They're sniffing them out for M&A or research. And they're essentially that fourth industrial revolution. It's that next generation and energy and tech and space and pharmaceuticals, you name it.It's companies that you might not be as familiar with.Caroline WoodsOkay. And we'll get to some of those companies in terms of where the money's flowing. But first I do want to ask you because you use something called retail sentiment intelligence. So you're essentially listening to the internet social listening. How do you separate real long term conviction from some of these crypto scams that we've been seeing from bots, from just a lot of social media noise?Sylvia JablonskiThat's a great question. And that's where New Future, actually comes in. Right. So future and Partners is who powers the Intel and the research behind this ETF. And they are analysts of these stocks. Right. So they are actively looking at all of these companies going to the meetings, learning about what they do, following their IP, following their tech developments.And they actually provide the secret sauce or the scoring of of the universe of stocks. And then we look at things like price trends, momentum, you know, retail sentiment and and essentially where the puck is going in some of these stocks. So there is there is a good amount of analysis behind this.Caroline WoodsOkay. So let's talk about where the money is flowing okay. Portfolio I don't think a surprise to anyone is tech heavy. Yes but not mag seven. So there's some mag seven fatigue there.Sylvia JablonskiYeah I mean there it could have Mag seven one day. But you know right now it doesn't because we're looking at again that fourth industrial revolution the tech of tomorrow. So a lot of times these are the smaller two mid-cap names within the space. They're certainly in partnerships with Mag seven. But yeah you have names. You have names in there like Aced Rocket Labs.You know, Robinhood is holding empty energy. Okay. So quantum computing types of stocks and it's it's really meant to again, represent the disruptors in every sector.Caroline WoodsWe've seen this brutal selloff in software. Yes. Of course I'm curious is the retail crowd buying that dip or are they losing patience there.Sylvia JablonskiI think they bought that dip right. I think first of all I think it was overdone. I think if you look at the AI story and how it's how it's growing and how it's smoothing out, software is going, it's very likely to be a big component of that and unlikely to be completely replaced with, you know, the innovations of AI in the coming years.And also the companies that were punished are companies that are leading and things like AI and quantum computing, you know, in the technology of tomorrow. So these these companies are being punished for their software aspect. They're also doing many other things. But yes, I mean, you can kind of see how the market recovered over the last couple of days.It's very much the retail came in and bought on the dip.Caroline WoodsI think I'm curious what your personal view is on some of those oversold software names. What would you be buying on the dip?Sylvia JablonskiI, I am very much a believer that the future is. I like a lot of other retail investors. And so everything that has to do with the AI infrastructure, whether it's the energy behind it, whether it's the wireless, the connectivity behind it, whether it's a high for space or AI for modern warfare, I think that's the story. And a lot of the big players that sold off are actually leaders in this space.Caroline WoodsBut what separates the winners from the losers? Because we know after the.com bust, there was only one Amazon, only one Google.And the names that failed. So.Sylvia JablonskiWell, I think so. It's really interesting because the difference between now and the.com busses revenue there is revenue, right? These companies are very profitable. They have quality balance sheets at least if we're talking about the max Max seven, the hyperscalers, things like this. And then the smaller names, I mean they're going what's, what's going to separate them is, is also revenues.Right. So for now you have quantum computing. Is that a great example. You have these quantum these quantum computing companies like ion Q or Rigetti that are part of the frontier and transformation of quantum computing. And they're on the verge of being profitable. Right. But for now, it's a lot of R&D. And they are part of what we're seeing is commercialization of quantum computing.And so I think if it comes to fruition and you start seeing that revenue hit, then they're here for the long run. If you start seeing the little players that, you know, continue to kind of operate without any revenue, I think that kind of tips you off in terms of like where to allocate.Caroline WoodsOkay. Going back to where the retail money is flowing energy fuels ticker symbol. You you you you why uranium and why now.Sylvia JablonskiYeah I it's again I it's right it's the word of the day. So I think I think if we think about I think the global AI tam total addressable market right now is something like 390 billion. It's thought to be two and a half to 3 trillion. Those are the estimates that that I see out there by 2030.That's four years away. That's a big leap. Right. And so what has to happen in order for that to actually come to fruition? It needs to be powered. You need energy. You need fuels. You need, you know, alternative assets to essentially cool, you know, power, build out the data bases and things like this. The data warehouses, machine learning.And so I think a lot of these companies are now participating in ways that haven't been thought of before, even companies that we're well aware of, like GE, you know, I mean, they're playing a huge role, right? Quanta services, they're playing a huge role because of the AI infrastructure.Caroline WoodsBuild out a different way to play AI lemonade. Yeah. LM and.Sylvia JablonskiYes.Caroline WoodsI insurance. It's not necessarily a picker a shovel or you know, but it's a beneficiary of AI.Sylvia JablonskiA beneficiary of AI. And this is this is also, you know, like Rocket Mortgage is another one similar type of vein, right? It's it's a way that they're going to optimize their business models. They're going to better calculate the risk that they take on the client profile that they take on. They're going to better target the client that they actually get and have have an easier conversion and sell.And I think that, you know, again, we're talking about that next generation, we are very much on line. We are very much more comfortable with these high tech or, or, you know, more tech ways of dealing rather than calling someone at an insurance company or at a bank. And I think that these companies will benefit from that.Caroline WoodsWhen you take a step back and look at where the retail dollars are actually flowing. Yes. What does that tell you about positioning for 2026 from the retail investor?Sylvia JablonskiRight. And and so I think it's important to distinguish that. Right. The retail investor from maybe institutional folks because on one side you hear a lot of, you know, diversify your your portfolio. Perhaps some of this has run out. The multiples are high and institutions are giving us feedback in different ways, like they're more of an X Mac allocation.Right. But the retail community, I mean, the flows that we see are, you know, very much going in quantum computing. That's been our our biggest growing space at our firm. Anyway, I power and infrastructure is another one. Again defense but AI for defense modern warfare things like this. So again I think it's the AI trade and and and it's family.It's cousins and siblings and you know and ETFs like that.Caroline WoodsWhat's an example of a company that retail investors are loving.

But Wall Street isn't touching or vice versa.Sylvia JablonskiYeah I mean I'm trying to think of ones that they're not touching because the retail community now has such a big voice that it ends up getting touched. But I would say that the retail community is is very invested in the drone companies, for example, and maybe institutions are starting to catch up on some of those. There's, you know, certainly like the Rocket Labs as to, you know, the, the future idea of space X and things like this.I think that there's a lot of enthusiasm on the retail side for that. And institutions are starting to catch up on that.Caroline WoodsRetail money used to be called dumb money. Is it actually smarter now or is it just faster?Sylvia JablonskiI guess it's it's taking up a big it's taking up a big part of the market. And I think, you know, it's also a wealth transition. It's a generational transition. There are statistics out there, for example, that, you know, over the last decade, millennials and and younger have allocated less than 50% of of their funds essentially to equities.Right? They would just go into their 4 or 1 K plan and pick whatever mutual fund was available to them. That number has now grown to 72% of of millennials and beyond are allocating to equities. So you have you know millennials are entering their in their 40s early 40s mid 40s. They're in their moneymaking years. And what are they buying.They're buying equities. And then beyond that you know the buck has been caught by Gen Z. And you have these you have groups of individuals who are now investing prior to the age of 18 at a higher rate than ever before. Right. And again, that's 16 trillion of wealth. Like, if you think about that, if that goes mainly towards equities, it becomes a large part of the market.And is it smart money or dumb? You know, it depends I think on investor habits. We'll have to see what the retail community does. You know, I think the buying whole dollar cost averaging thing, whether it's in a mutual fund, an ETF is is wise. But we'll have to see how they trade.Caroline WoodsDo you have a gauge on what sentiment is like right now though because it is helping to move this market. It's many times it's actually leading the market.Sylvia JablonskiYes.Caroline WoodsWhat does the retail investor or how do they feel right now.Sylvia JablonskiSo if you look at the surveys, it's it's tough to break them out because they're institutional types of surveys. Right. So broad based investor sentiment is improving slightly. It had been kind of stable to the negative side over the last couple of years. And we're starting to see some improvement in that retail sentiment. But if you look at the retail sentiment on places like X and and Reddit and, you know, social media communities, and podcasts and the young influencers, there is so much excitement about the market and there's so much excitement about the future of tech and the fourth industrial revolution.It's, you know, it's it's incredibly high levels of enthusiasm from that community.Caroline WoodsAnd just quickly, one thing that we didn't touch upon, although with holdings like Robinhood, it is linked, but it's crypto. Yes I do. You have a lot of exposure to crypto in your retail ETF. And what is sentiment like around there, given the fact that we've seen bitcoin fall so far from its highs.Sylvia JablonskiYeah. So so it could it could be it could be that stocks related to crypto end up in the ETF if they passed the momentum scoring system and things like this. So we're not kind of you know actively saying we should buy Bitcoin or something like this. It has to pop up on the model. But I do think that there are some some trepidation, hesitation around what we're seeing in Bitcoin.I think that most of the market has expected a little bit more of a bounce at this point. You know, the fact that we're under that 70,000 level and in the high, you know, high 60,000 range, I think is concerning to some market participants. So I think that, you know, if you start to see us breaking past that 70 and then that 72 five and 75,000, you'll get investors back in.But it depends on who you who you speak to. Right. If you you know, he talked to a Michael Saylor or Tom Lee. I mean, they're just continuing to buy this up and buy on the dip, right? And that is certainly moving the space. But I think what happened was there was a little bit of a risk off sentiment.People went towards gold that seemed safer and it was performing. And now we'll see where it goes.Caroline WoodsHow often are you making changes to your portfolio?Sylvia JablonskiFor that particular ETF? It's a quarterly report.Caroline WoodsQuarterly. Yeah. Okay. All right. Yes. We're wrapping up there. But before we let you go, we want to do our rapid fire game of this year that you played with us before you start playing it.Sylvia JablonskiYeah. It's very stressful.Caroline WoodsAll right here we got ourtactical tech pullback. Buy the dip or wait.Sylvia JablonskiIt out by the dev.Caroline WoodsMag seven or the rest of the markets.Sylvia JablonskiOh I'm got this. Can I qualify my answer. Sure. I'm going to say X mag only because everyone has Mag seven. So I'm not saying to abandon it. I just think you already have it.Caroline WoodsJust hold it. Software sell off real threat or buy the dip. Buy the best software dip to buy.Sylvia JablonskiOh goodness, I think I think some of the mag seven like the Microsoft maybe.Caroline WoodsI chips or I agents.Sylvia JablonskiI I chips.Caroline WoodsData centers or cloud software.Sylvia JablonskiCan I say both. Okay we'll give you one. Both. Yes.Caroline WoodsAndy or Intel.Sylvia JablonskiAMD.Caroline WoodsWhat's a stock that looks scary now but will be worth your money to buy?Sylvia JablonskiOh, goodness. Again, I would, I would say a lot of the space companies, the space tech just because they're new.Caroline WoodsWhat's one that seems expensive? Not now, but will ultimately be a good value.Sylvia JablonskiSeems expensive. I'm going to get the obvious answer. I just think that everything is about AI and it just doesn't exist without Nvidia. So although it's at its all time highs is the obvious answer, I do think that it has a permanent place in AI portfolio.Caroline WoodsOkay, off of that, what's one hidden gem tech?Sylvia JablonskiHidden gem tech? I'm going to say probably good question. Okay. I mean, I don't know if it's it's so hidden, but I think the AI powered infrastructure, I think like an IPO or a single stock in there could be a quanta.Caroline WoodsOkay. The most misunderstood stock in your Retail Kings portfolio right now.Sylvia JablonskiOh, misunderstood probably quantum. And mainly because a lot of people just haven't caught up to what it is.Caroline WoodsI don't understand it. Yes. Is retail money smarter or just faster right now?Sylvia JablonskiI think sometimes it's smarter. It's certainly faster.Caroline WoodsSpace or defense.Sylvia JablonskiOh, that I mean, they go hand in hand. You can't have one without the other. So, I think space will change defense. So we'll go with space for the high growth.Caroline WoodsNuclear or solar.Sylvia JablonskiNuclear.Caroline WoodsEnergy transition or energy security.Sylvia JablonskiAnother tough one, I will say transition.Caroline WoodsCopper or lithium.Sylvia JablonskiCopper.Caroline WoodsUranium or rare earths.Sylvia JablonskiAbsolutely need them both. Let's go with rare Earth.Caroline WoodsWhat is one tech company currently hiding in plain sight? That will be a household name by 2027.Sylvia JablonskiHousehold name? Let's say, It's hiding in plain sight, but I think like a D-Wave or an iron cube. Just because I do think that the quantum transition is going to materialize in the next couple of years, and those companies will continue to grow.Caroline WoodsAll right. We'll leave it there. Not too.Sylvia JablonskiStressful.Caroline WoodsSo we always appreciate you joining us.Sylvia JablonskiThanks so much for having me.Caroline WoodsThat's Sylvia Jablonski, chief investment officer at Defiance ETFs.