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Wall Street saw turbulent trading last week with wild swings of 4% each day. In fact, U.S. stocks triggered two lower circuits last week while also logging the best day in history on Friday. Notably, Thursday marked the worst performance for U.S. stocks since "Black Monday" on Oct 19, 1987 (read: Long/Short ETFs to Fight Market Crash).
The chaos has been driven by fears of economic slowdown as a result of the coronavirus crisis, which has deepened with the rapidly rising number of cases around the world. The situation has led to suspension of professional sports games, cancelation of major events, conferences and conventions, and half-empty restaurants, signaling that the longest U.S. economic expansion might come to an end. Additionally, President Donald Trump suspended all travel from Europe to the United States for 30 days beginning Mar 13 midnight, with the exception of the United Kingdom.
Further, the Federal Reserve announced a series of emergency stimulus measures to protect the economy from the fallout of deadly coronavirus. It slashed interest rates to near zero in an emergency move once again and launched a quantitative easing program of at least $700 billion. The U.S. stock market went into a tailspin following the news, triggering another lower circuit in early market trading today.
Given this, we have highlighted ETFs from the best and worst zones of last week and could continue the same way this week as well if fundamentals remain the same:
Best Zones
Volatility
As the stock market is witnessing huge volatility, volatility products were the biggest winners. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) gained the most by 30.7% last week. It focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months of VIX futures contracts. This ETN is unpopular and illiquid with AUM of $1.1 billion and average daily volume of 47 million shares. The note charges 89 bps in annual fees (read: Volatility ETF Hits New 52-Week High).
Gold Mining
Gold gained on risk-off trade as rapidly spreading coronavirus as well as oil price collapse sent U.S. stocks into bear market. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins. While most of the ETFs saw solid gains last week, iShares MSCI Global Gold Miners ETF (RING - Free Report) climbed 12.7%. This ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 36 securities in its portfolio. Canadian firms take 47.6% of the portfolio, while United States and South Africa round out the next two with double-digit exposure each. RING is the cheapest choice in the gold mining space, charging just 39 bps in fees and expenses. The fund has been able to manage assets worth $414.5 million and trades in a good volume of 320,000 shares per day (read: How to Play Gold Rally With ETFs).
Treasury
The fixed income space has been enjoying huge rally lately on increased demand for safe havens. PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) has risen 10.6% last week. This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 21 securities in its basket. Both effective maturity and effective duration of the fund are 27.27 years. This fund has a decent level of $482.3 million in AUM and a light average daily volume of 67,000 shares. It charges 15 bps in annual fees and has a Zacks Rank #3 with a High risk outlook (read: Top ETF Stories of Virus-Infected February).
Worst Zones
Energy
Energy sector has been hit hard on oil price collapse as the fast-spreading deadly virus has resulted in a slowdown in energy consumption amid a well-supplied oil market. In particular, Invesco S&P SmallCap Energy ETF (PSCE) declined the most, shedding 21.1%. This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 43 stocks in its basket with AUM of $12.7 million. The fund trades in average daily volume of 59,000 shares and charges 29 bps in fees per year. It has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: Global Oil Price War Begins: ETFs in Focus).
Small Cap Value
The small-cap corner of the broader U.S. equity market has been hammered in the virus-led market turmoil. Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) was down 8.6% last week. This fund provides pure exposure to the small-cap value segment of the U.S. equity market by tracking the S&P SmallCap 600 Pure Value Index. It holds 148 securities with none making up for more than 2.6% of the assets. The product has amassed $131.2 million in its asset base while charging 35 bps in annual fees. It trades in average daily volume of 21,000 shares and has a Zacks Rank #3 with a High risk outlook.
Banks
The banking sector has been struggling due to the dual attack of tumbling yields and oil price collapse. Falling rates tend to hurt banks because they pressure the spread between what lenders pay out to depositors and what they collect from borrowers. Further, the banks, which are highly exposed to the energy sector, are increasing their loan reserves due to a prolonged decline in crude oil prices. The higher provisioning to cover the bad loans of the energy companies are weighing on their overall earnings picture and could result in deteriorating credit quality (read: Coronavirus Fuels Madness in These Sector ETFs & Stocks).
As such, iShares U.S. Regional Banks ETF (IAT - Free Report) tumbled 8.3%. This ETF offers exposure to 58 small and mid-cap regional bank stocks by tracking the Dow Jones U.S. Select Regional Banks Index. It is largely concentrated on the top three firms with double-digit exposure each while other firms hold no more than 4.3% share. The fund has amassed $267.1 million in its asset base and sees a good volume of 93,000 shares a day. It charges 42 bps in annual fees and has a Zacks Rank #3 with a High risk outlook.
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Hit and Flop ETF Zones of Last Week
Wall Street saw turbulent trading last week with wild swings of 4% each day. In fact, U.S. stocks triggered two lower circuits last week while also logging the best day in history on Friday. Notably, Thursday marked the worst performance for U.S. stocks since "Black Monday" on Oct 19, 1987 (read: Long/Short ETFs to Fight Market Crash).
The chaos has been driven by fears of economic slowdown as a result of the coronavirus crisis, which has deepened with the rapidly rising number of cases around the world. The situation has led to suspension of professional sports games, cancelation of major events, conferences and conventions, and half-empty restaurants, signaling that the longest U.S. economic expansion might come to an end. Additionally, President Donald Trump suspended all travel from Europe to the United States for 30 days beginning Mar 13 midnight, with the exception of the United Kingdom.
Further, the Federal Reserve announced a series of emergency stimulus measures to protect the economy from the fallout of deadly coronavirus. It slashed interest rates to near zero in an emergency move once again and launched a quantitative easing program of at least $700 billion. The U.S. stock market went into a tailspin following the news, triggering another lower circuit in early market trading today.
Given this, we have highlighted ETFs from the best and worst zones of last week and could continue the same way this week as well if fundamentals remain the same:
Best Zones
Volatility
As the stock market is witnessing huge volatility, volatility products were the biggest winners. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) gained the most by 30.7% last week. It focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months of VIX futures contracts. This ETN is unpopular and illiquid with AUM of $1.1 billion and average daily volume of 47 million shares. The note charges 89 bps in annual fees (read: Volatility ETF Hits New 52-Week High).
Gold Mining
Gold gained on risk-off trade as rapidly spreading coronavirus as well as oil price collapse sent U.S. stocks into bear market. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins. While most of the ETFs saw solid gains last week, iShares MSCI Global Gold Miners ETF (RING - Free Report) climbed 12.7%. This ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 36 securities in its portfolio. Canadian firms take 47.6% of the portfolio, while United States and South Africa round out the next two with double-digit exposure each. RING is the cheapest choice in the gold mining space, charging just 39 bps in fees and expenses. The fund has been able to manage assets worth $414.5 million and trades in a good volume of 320,000 shares per day (read: How to Play Gold Rally With ETFs).
Treasury
The fixed income space has been enjoying huge rally lately on increased demand for safe havens. PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report) has risen 10.6% last week. This ETF follows the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 21 securities in its basket. Both effective maturity and effective duration of the fund are 27.27 years. This fund has a decent level of $482.3 million in AUM and a light average daily volume of 67,000 shares. It charges 15 bps in annual fees and has a Zacks Rank #3 with a High risk outlook (read: Top ETF Stories of Virus-Infected February).
Worst Zones
Energy
Energy sector has been hit hard on oil price collapse as the fast-spreading deadly virus has resulted in a slowdown in energy consumption amid a well-supplied oil market. In particular, Invesco S&P SmallCap Energy ETF (PSCE) declined the most, shedding 21.1%. This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 43 stocks in its basket with AUM of $12.7 million. The fund trades in average daily volume of 59,000 shares and charges 29 bps in fees per year. It has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: Global Oil Price War Begins: ETFs in Focus).
Small Cap Value
The small-cap corner of the broader U.S. equity market has been hammered in the virus-led market turmoil. Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) was down 8.6% last week. This fund provides pure exposure to the small-cap value segment of the U.S. equity market by tracking the S&P SmallCap 600 Pure Value Index. It holds 148 securities with none making up for more than 2.6% of the assets. The product has amassed $131.2 million in its asset base while charging 35 bps in annual fees. It trades in average daily volume of 21,000 shares and has a Zacks Rank #3 with a High risk outlook.
Banks
The banking sector has been struggling due to the dual attack of tumbling yields and oil price collapse. Falling rates tend to hurt banks because they pressure the spread between what lenders pay out to depositors and what they collect from borrowers. Further, the banks, which are highly exposed to the energy sector, are increasing their loan reserves due to a prolonged decline in crude oil prices. The higher provisioning to cover the bad loans of the energy companies are weighing on their overall earnings picture and could result in deteriorating credit quality (read: Coronavirus Fuels Madness in These Sector ETFs & Stocks).
As such, iShares U.S. Regional Banks ETF (IAT - Free Report) tumbled 8.3%. This ETF offers exposure to 58 small and mid-cap regional bank stocks by tracking the Dow Jones U.S. Select Regional Banks Index. It is largely concentrated on the top three firms with double-digit exposure each while other firms hold no more than 4.3% share. The fund has amassed $267.1 million in its asset base and sees a good volume of 93,000 shares a day. It charges 42 bps in annual fees and has a Zacks Rank #3 with a High risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>