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Best and Worst ETF Zones of the First Nine Months of 2023
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In the face of higher rate fears for a longer period and soaring yields, the Wall Street has shown strong resilience this year, underscoring economic optimism and steady inflows. This is especially true as the S&P 500 index is up 13% so far this year without dropping 1.5% or more in over 100 consecutive sessions for the first time since 2018.
While the index has experienced four declines of more than 1% since it peaked earlier this year, daily fluctuations have generally remained subdued, reminiscent of the stability seen in 2018. Technology has been the best sector so far of this year despite the fear of higher rates.
The economy has withstood the worst of the Fed’s policy tightening. The central bank has raised interest rates 11 times to the highest level since 2001 over the course of 16 months and has hinted at one more rate hike this year if needed. Recent indicators suggest that economic activity has been expanding at a moderate pace, buoyed by robust consumer spending, strong job gains and a low unemployment rate.
Further, corporate earnings have improved. There has been a notable improvement in the earnings outlook in recent months, with positive revisions for several key sectors since the start of the third quarter (read: 5 ETFs That Are Up More Than 40% So Far This Year).
On the commodity side, oil has shown strong rebound in the recent months after lagging for most of this year on tightening supply conditions and the prospect of higher demand. The global oil market is expected to face the biggest deficit in over a decade while world oil demand is scaling record highs. Uranium prices have entered a bull market, soaring nearly 40% since the beginning of the year, a level not witnessed since 2011. The surge has been driven by the global push to consider nuclear energy as an eco-friendly alternative to coal and gas. Uranium, used mainly in nuclear power plants, is one of the cleanest ways to produce electricity.
Further, the U.S. dollar index also hit a 10-month high against a basket of major currencies. The combination of surging oil prices and the speculation of high interest rates for an extended period has driven the currency higher.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones of the first nine months of 2023:
Bitcoin had a strong start to 2023, shrugging off the economic uncertainty and regulatory crackdown woes on some crypto exchanges. However, the rally faltered in recent months. Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining.
Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a near double-digit concentration on the top five firms. It has amassed $13.3 million in its asset base while trading in an average daily volume of 111,000 shares. WGMI charges 75 bps in annual fees (read: 5 Best-Performing Sector ETFs of Nine Months).
Sugar prices have risen this year due to higher demand and constrained supply. The upswing in demand for sugar can be attributed to economic recovery after the pandemic. However, supply is threatened by unfavorable weather conditions in major sugar-producing regions. Teucrium Sugar Fund provides investors with an easy way to gain exposure to the price of sugar futures in a brokerage account. It has an expense ratio of 0.29% and trades in an average daily volume of 60,000 shares.
Teucrium Sugar Fund has amassed $24.1 million in its asset base and has a Zacks Rank #4 (Sell).
Uranium miners have built up strong momentum, underpinned by the global push to consider nuclear energy as an eco-friendly alternative to coal and gas. Sprott Uranium Miners ETF provides exposure to companies involved in the mining, exploration, development and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 83 bps in annual fee (read: Why Uranium ETFs Are Going Nuclear).
Sprott Uranium Miners ETF holds 37 stocks in its basket and has AUM of $1.3 billion in its asset base. It trades in a good volume of 507,000 shares per day on average.
Worst ETFs
KraneShares Global Carbon Offset Strategy ETF ) – Down 74.7%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
KraneShares Global Carbon Offset Strategy ETF has gathered $1.4 million in its asset base and trades in a volume of 10,000 shares a day on average. It charges 79 bps in annual fees.
ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
ProShares VIX Short-Term Futures ETF has amassed $225.8 million in AUM and charges 85 bps in fees per year. It trades in volume of 5 million shares per day on average.
United States Natural Gas Fund (UNG - Free Report) ) – Down 51.5%
Natural gas price declined due to an increased surplus of working natural gas stocks and record-high levels of natural gas production. United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire. The natural gas contract is natural gas delivered at Henry Hub, LA (read: Natural Gas ETFs Stuck In Between Idalia & Chevron Strike).
The United States Natural Gas Fund has an AUM of $1.1 billion and trades in a volume of around 16 million shares per day. UNG has a 1.06% expense ratio.
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Best and Worst ETF Zones of the First Nine Months of 2023
In the face of higher rate fears for a longer period and soaring yields, the Wall Street has shown strong resilience this year, underscoring economic optimism and steady inflows. This is especially true as the S&P 500 index is up 13% so far this year without dropping 1.5% or more in over 100 consecutive sessions for the first time since 2018.
While the index has experienced four declines of more than 1% since it peaked earlier this year, daily fluctuations have generally remained subdued, reminiscent of the stability seen in 2018. Technology has been the best sector so far of this year despite the fear of higher rates.
The economy has withstood the worst of the Fed’s policy tightening. The central bank has raised interest rates 11 times to the highest level since 2001 over the course of 16 months and has hinted at one more rate hike this year if needed. Recent indicators suggest that economic activity has been expanding at a moderate pace, buoyed by robust consumer spending, strong job gains and a low unemployment rate.
Further, corporate earnings have improved. There has been a notable improvement in the earnings outlook in recent months, with positive revisions for several key sectors since the start of the third quarter (read: 5 ETFs That Are Up More Than 40% So Far This Year).
On the commodity side, oil has shown strong rebound in the recent months after lagging for most of this year on tightening supply conditions and the prospect of higher demand. The global oil market is expected to face the biggest deficit in over a decade while world oil demand is scaling record highs. Uranium prices have entered a bull market, soaring nearly 40% since the beginning of the year, a level not witnessed since 2011. The surge has been driven by the global push to consider nuclear energy as an eco-friendly alternative to coal and gas. Uranium, used mainly in nuclear power plants, is one of the cleanest ways to produce electricity.
Further, the U.S. dollar index also hit a 10-month high against a basket of major currencies. The combination of surging oil prices and the speculation of high interest rates for an extended period has driven the currency higher.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones of the first nine months of 2023:
Best ETFs
Valkyrie Bitcoin Miners ETF (WGMI - Free Report)
Bitcoin had a strong start to 2023, shrugging off the economic uncertainty and regulatory crackdown woes on some crypto exchanges. However, the rally faltered in recent months. Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining.
Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a near double-digit concentration on the top five firms. It has amassed $13.3 million in its asset base while trading in an average daily volume of 111,000 shares. WGMI charges 75 bps in annual fees (read: 5 Best-Performing Sector ETFs of Nine Months).
Teucrium Sugar Fund (CANE - Free Report) ) – Up 57.2%
Sugar prices have risen this year due to higher demand and constrained supply. The upswing in demand for sugar can be attributed to economic recovery after the pandemic. However, supply is threatened by unfavorable weather conditions in major sugar-producing regions. Teucrium Sugar Fund provides investors with an easy way to gain exposure to the price of sugar futures in a brokerage account. It has an expense ratio of 0.29% and trades in an average daily volume of 60,000 shares.
Teucrium Sugar Fund has amassed $24.1 million in its asset base and has a Zacks Rank #4 (Sell).
Sprott Uranium Miners ETF (URNM - Free Report) ) – Up 48%
Uranium miners have built up strong momentum, underpinned by the global push to consider nuclear energy as an eco-friendly alternative to coal and gas. Sprott Uranium Miners ETF provides exposure to companies involved in the mining, exploration, development and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 83 bps in annual fee (read: Why Uranium ETFs Are Going Nuclear).
Sprott Uranium Miners ETF holds 37 stocks in its basket and has AUM of $1.3 billion in its asset base. It trades in a good volume of 507,000 shares per day on average.
Worst ETFs
KraneShares Global Carbon Offset Strategy ETF ) – Down 74.7%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
KraneShares Global Carbon Offset Strategy ETF has gathered $1.4 million in its asset base and trades in a volume of 10,000 shares a day on average. It charges 79 bps in annual fees.
ProShares VIX Short-Term Futures ETF (VIXY - Free Report) ) – Down 59.7%
ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
ProShares VIX Short-Term Futures ETF has amassed $225.8 million in AUM and charges 85 bps in fees per year. It trades in volume of 5 million shares per day on average.
United States Natural Gas Fund (UNG - Free Report) ) – Down 51.5%
Natural gas price declined due to an increased surplus of working natural gas stocks and record-high levels of natural gas production. United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire. The natural gas contract is natural gas delivered at Henry Hub, LA (read: Natural Gas ETFs Stuck In Between Idalia & Chevron Strike).
The United States Natural Gas Fund has an AUM of $1.1 billion and trades in a volume of around 16 million shares per day. UNG has a 1.06% expense ratio.