UAW Strike: A Teachable Moment for Advisors

UAW Strike: A Teachable Moment for Advisors

History of labor disputes in the car industry is a good reminder for auto ETF investors. 

RobIsbitts310x310
|
Reviewed by: Sean Allocca
,
Edited by: Ron Day

U.S. carmakers are on the cusp of a production snag as unresolved differences between those who make vehicles and their managers raises the possibility of a work stoppage. 

While not being blind to the wide gulf between labor and management, now is a good time for financial advisors and exchange-traded fund investors to focus on the industry and to widen their exchange-traded fund knowledge. 

The United Auto Workers is deep into a battle with the three major Detroit-based auto companies. With a deadline for a settlement looming at one minute before midnight tonight, the clock is ticking.  

The disagreement is the latest in a long history of management versus labor tensions in the industry and may serve to remind financial advisors and investors that the auto industry is and should continue to be a vital part of the U.S. and global economies. 

Regardless of whether there is a UAW strike and how long it lasts, we’ll eventually get back to the potential investment attraction of ETFs that invest in automakers and the businesses that service them.  

Auto Workers’ Strike, Advisors and ETFs 

People love evaluating, buying and driving cars. I’m not among them.  

For investment advisors, whether investing in automotive stocks is a priority or not, that industry’s accessibility through the ETF wrapper can be a great conversation starter for clients who know a lot about cars, but not about ETFs.  

Any time an advisor can help a client relate to the complex business of investment and portfolio management through more familiar topics, it’s a win-win for the advisor and the client. 

The emphasis, when it comes to automobile-related ETFs, is more on where that form of transportation is going than where it has been. Investors won’t see much of the Big Three automakers in those funds. Instead, the focus is on the transition to cars that are essentially computers with wheels, including self-driving cars and trucks.  

What is a “Car” Today? 

Thus, it is important to distinguish between car ETFs that devote a large portion of their assets to companies whose primary business is auto related and those that more closely resemble a Nasdaq 100 or FAANG ETF. Since many of the tech giants earn a portion of revenue from providing products and services to the auto industry, the ETFs in the latter category can be quite broad.  

These include the First Trust S-Network Future Vehicle & Technology ETF (CARZ) and the Global X Autonomous & Electric Vehicles ETF (DRIV)

Two ETFs whose larger holdings are more correlated to the auto industry itself include the Fidelity Electric Vehicles & Future Transportation ETF (FDRV) and the KraneShares Electric Vehicles and Future Mobility Index ETF (KARS). 

Tesla (TSLA) was the forerunner of this era of tech-enabled cars, and the legacy auto producers are in that arena as well, along with their leading non-US competitors. But what was once a future idea for the auto industry has arrived. The mix of companies that make traditional fuel-driven and battery-operated cars is changing.  

That has not been lost on ETF providers: At least a half-dozen diversified funds now exist to pursue the present and future of the automotive industry. And this is one of many niche ETF areas that advisors can pair up with their clients’ hobbies and passions to make the case for the ETF opportunity. 

Rob Isbitts' Wall Street career spans 5 decades and multiple roles, all dedicated to providing clarity to investors by busting classic myths and providing uncommon perspective. He did so as a fiduciary investment advisor, Chief Investment Officer and fund manager for 27 years before selling his practice in 2020. His efforts now focus exclusively on investment research, education and multimedia. He started ETFYourself and SungardenInvestment to provide straightforward commentary and access to his investment intellectual property for portfolio construction, stocks and ETFs. Originally from New Jersey, Rob and his wife Dana have 3 adult children and have lived in Weston, Florida for more than 25 years.