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Water ETF on New All-Time Highs-Should We Worry?

March 13, 2024

Mish's Daily

By Mish Schneider

In February this year, PHO the ETF Invesco Water Resources, surpassed the old high of around $61 set in December 2021.

On March 8^th, 2024, PHO made a new all-time high at $65.12.

Should we worry when water-WATER-the most essential raw material for mankind’s existence is at new all-time highs?

And what does that mean for commodities and inflation?

“PHO is a water-themed fund of US companies that create products that conserve and purify water for homes, businesses, and industries. Holdings are weighted by liquidity, with no more than five companies capped at 8% and with the rest distributed equally.” etf.com

The top 4 PHO Sectors are:

Producer Manufacturing
Technology Services
Distribution Services
Health Technology

The top 5 holdings are:

Ecolab Inc

8.19

Basic Materials

Ferguson PLC

8.18

Industrials

Veralto Corp

8.09

Industrials

Danaher Corp

7.98

Healthcare

Roper Technologies Inc

7.98

Technology

There are currently six ETFs covering the water space, but only four of them have more than $100 million in assets under management.

PHO is the top one.

Water shortages expected to increase in the following years.

“water scarcity is expected to worsen as the global population continues to boom. By 2030, demand for global freshwater is projected to exceed supply by 40%,” Fidelity

How frightening that all sounds.

Can AI produce water?

Actually, AI is taking water from the desert.

For now, companies like Microsoft are working towards partnering with power providers to bring more solar and wind energy online and put water back into the lakes and rivers.

Cross purposes as they continue to expand OpenAI.

PHO has been a holding in our GEMS model since December. We are close to our first profit target.

The chart shows you how this crossed the old all-time high and this year’s January 6-month calendar range high at the same time.

While PHO was outperforming SPY, it is currently slightly underperforming.

Real Motion shows the mean reversion in early March but no real bearish divergences of concern.

61.50 level is massive support.

Through 65.12 it is possible to see a move to 67.00. PHO is slow moving.

We think the relationships to the climate and AI is interesting.

We wonder how this impacts other commodities as well, especially the ones that also pull water from lakes and rivers in order to cultivate.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
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