In terms of how he sees his customers investing during uncertainty in the market, Wunder states: "We're seeing net inflows being quite strong. And so customers are reacting to the economic backdrop. I think sitting on cash for the vast majority of people doesn't make a lot of sense when you think about planning for your future. I think our customers have done a good job of listening to the education that we put into the market."
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AKIKO FUJITA: We are continuing to watch the markets here climb higher on the back of that hotter than expected February inflation print. Wall Street considering how the print impacts Fed rate cuts.
To discuss what this means for investors, let's bring in Seth Wunder, Acorns CFO and CIO. Seth, you've always got a pretty good pulse on what this means for everyday investors, kind of how they're looking at their portfolios with the expectation of how these rates could move. What are you seeing?
SETH WUNDER: Yeah, thanks for having me. I think the average investor today feels like they understand what's going on in inflation and why the Fed has raised rates the way they have. And I think the general feeling that a lot of the components of inflation now have normalized or leveled out over the last six-plus months.
I think it's giving people comfort that they can start taking risks again. They can start making investment decisions that they feel good about. And we see positive trends in terms of consumers thinking about how to plan and invest for their long term.
RACHELLE AKUFFO: So Seth, where are you seeing the biggest inflows among retail investors right now?
SETH WUNDER: Yeah, so at Acorns, the way we set up the investment experience for our customers is that they really invest in small increments over time. And so we teach them through roundups or through recurring investments to constantly be investing in the market to take advantage of market dips, but also to plan for the future over the long term.
And so for us, the inflows and customer appetite has been fairly consistent. What's most important, from our vantage point, is really educating customers so that they understand why the markets have either dipped or rallied over time.
And then in this situation specifically, what we've been explaining to them is that if you look back at the soft landing period from let's say '94, '95, you've had-- you had, at least at that time, four straight years of 30%-plus compounded returns, which is well, well, well above market average.
And it was really the idea that the Fed normalized inflation, held rates fairly consistent actually for a longer period of time, but because we were off of the worst of those fears, you saw multiples and economic growth really compound. And so giving people that insight where they may not have it is the key thing that we've been able to work with our customers about.
AKIKO FUJITA: Yeah, Seth, I'm curious, given just the uncertain environment we have seen in the economy over the last few years, we have been hearing anecdotally of so many people kind of putting cash on the sidelines here because of just how choppy the markets have been. What are you seeing with everyday investors? I mean, you just talked about how you're advising them. But are you starting to see maybe some of your customers or clients sort of saying, OK, I'm ready to get back in the market because of a little more clarity on where things are headed?
SETH WUNDER: Yeah, for sure. As I mentioned before, we're seeing net inflows being quite strong. And so customers are reacting to the economic backdrop. I think sitting on cash, for the vast majority of people, doesn't make a lot of sense when you think about planning for your future. And I think our customers have done a good job of listening to the education that we've put into the market.
I mean, if you look at the markets today-- let's just step back for a second. You've got a broadening of contributors to the S&P 500. Last year was a very tech heavy contribution to winners. And now you're seeing a healthier market backdrop. You're seeing earnings growth re-accelerate, which is super positive.
You've seen Fed rates actually hold. And obviously we're talking about when and if they may cut. But the reality is there's still a really good yield out there for those who have bond investments now that the rate of rate increases has normalized.
And so for a diversified investor across stocks and bonds, which the vast majority of our customers are, you've got a real return to opportunities put in front of them. And the opportunity cost of not investing when you've got a good backdrop is significant, especially when we all know that time in the market is very difficult.
We teach people that time in the market is more important. And then the best part about the backdrop is the Fed now has flexibility. If the economy slows, they can lower rates. And if the economy stays where it is currently, which is actually quite reasonable or reasonably strong actually, then they'll hold rates. And so we give everyone that perspective so they understand it. And we're seeing customers respond to that.
RACHELLE AKUFFO: In certain terms of time in the market versus trying to hop in and get on some of these trends, I see that Acorns is allocating up to 5% of investments towards a Bitcoin-linked ETF. Talk about that decision, and how you're really guiding investors there.
SETH WUNDER: Yeah, so we introduced a Bitcoin ETF to give them exposure to Bitcoin a couple of years ago now at this point. And the nice way that we set it up was, it's a part of their already diversified portfolio. So we've given them a sense of comfort and all the risk management associated with being able to make an investment without overwhelming their portfolio, which we thought was important for a particularly volatile asset.
We also continue to use the same framework I mentioned before, which is consistent, small contributions into their portfolio. So when Bitcoin went down a lot, they really were able to take advantage of dollar cost averaging and being able to buy exposure into Bitcoin when spot Bitcoin was 25,000, 20,000, 17,000 even. And now, we see it's 70,000-plus.
And so for those investors who opted into Bitcoin and who thought about the proper way of thinking about portfolio construction and risk management and our educational backdrop underlying all of that, I think they felt pretty comfortable staying with it. We've actually seen an incredible amount of stickiness amongst customers who have opted into having Bitcoin in their portfolio.
And then now obviously, you continue to see the benefits of that as the asset has risen. And then, I'm sure, you would imagine, there's continued to be interest in adding that to their portfolios as well.