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4 Best ETF Areas of Last Week

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Wall Street was again downbeat last week with the S&P 500, the Dow Jones and the Nasdaq Composite losing about 1.2%, 0.9% and 1% last week. The Russell 2000 also lost 0.3% last week. As the jobs data came in upbeat, speculations of a resilient labor market and the possibility of a super-hawkish Fed strengthened in the later part of last week. This, in turn, triggered rising rate worries all over again and weighed on Wall Street.

The U.S. economy added 390,000 jobs in May 2022 (lower than 436,000 jobs in April), the least since April last year but above market forecasts of 325,000. The latest reading left the economy 0.5% below its pre-pandemic level, in a telltale sign of a solid labor market.  

Plus, on Jun 1, 2022, the Institute of Supply Management (ISM) reported that its manufacturing index for May rose to 56.1% from 55.4% in April, beating the consensus estimate of 54.5%. Faster increases were seen for new orders (55.1 vs 53.5), production (54.2 vs 53.6) and inventories (55.9 vs 51.6). Also, price pressures relieved for a second month (82.2 vs 84.6) while employment shrank (49.6 vs 50.9).

Such data points probably washed off the recessionary fears for the time being and bolstered the chances of higher rates. Against this backdrop, below we highlight a few ETF areas that topped the list last week.

Energy

Oil prices continue to surge amid the Russia-Ukraine geopolitical crisis. The sector has now everything— decent valuation, higher dividends and an upbeat operating backdrop. The energy sector recorded a 240.6% earnings expansion in Q1, with 174.1% growth expected in Q2 – the highest in the S&P 500 Index. The “Oracle of Omaha” — Warren Buffett — too is bullish on energy giants Chevron and Occidental (read: Top ETF Stories of May 2022).

United States Gasoline Fund, LP (UGA - Free Report) – Up 13.5%

Invesco DB Energy Fund (DBE) – Up 7.8%

Commodities

Inflation is red-hot currently across the globe. The war and the resultant rally in commodity prices has amplified inflation. Commodities have historically provided some protection against inflation. They also add diversification benefits to an equity-focused portfolio (read: More Rally for Commodity ETFs in the Cards?).

ELEMENTS Linked to the Rogers International Commodity Index - Total Return – Up 1.7%

iPath Bloomberg Commodity Index Total Return(SM) ETN (DJP) – Up 1.7%

Defensive ETFs

As the broader market remained rocky last week, defensive or alternative ETFs managed to hold their heads high. Defensive ETFs could go a long way in restoring the value of one’s portfolio against this edgy backdrop.

First Trust Managed Futures Strategy ETF (FMF - Free Report) – Up 1.6%

Shipping

The ongoing supply chain issues went in favor of the shipping industry. The chaos pushed the demand for shipping higher. May recorded the highest monthly increase in long-term contracted ocean freight rates since Oslo-based Xeneta started tracking these shipments. The monumental hike made the long-term rates up 150.6% year over year (read: 6 Winning ETF Areas of May).

SonicShares Global Shipping ETF (BOAT - Free Report) – Up 0.1%

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