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Top ETF Stories of April Likely to Hit Headlines Again in May
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The month of April was all about coronavirus-led global lockdowns, massive Fed and government stimulus in the United States, unprecedented policy easing in various parts of the globe, the biggest OPEC+ output cut deal, enormous crash in the WTI crude due to storage crisis, and Wall Street’s fast recovery after slipping into a bear market in mid-March (read: Top ETF Stories of First Quarter).
Relentless research on treatments and vaccines, along with talks of the U.S. economy reopening following an improvement in virus cases has given the broader market a boost. Moderate corporate earnings have also led to market strength. Though Wall Street saw a weak start to May due to the relapse of U.S.-China trade war tensions and weakness in some big companies’ earnings, things should smoothen out over the course of the month.
Still, we can’t expect the world to be like it was before the outbreak. So, volatility amid the market rally will be there. A lot depends on the progression of virus cases and its treatments. Against this backdrop, below we highlight a few a key April ETF events that will continue to hog attention in May.
Oil & Gas to Remain Equally Volatile
The month of April would always be known for the ebbs and flows in the WTI crude market due to storage crisis. Due to lockdown-led low demand, ample supplies and drying storage capacity, May WTI crude contract fell to the negative territory on Apr 20, for the first time in history, and the June contract too suffered lately.
WTI crude ETF United States Oil Fund, LP (USO - Free Report) , which was originally designed to track the spot price of WTI crude oil, changed its structure repeatedly to counter the fast slide in oil prices. The fund started betting in favor of longer-term contracts in recent times(read: Oil in Great Contango: Here's How to Play With Crude ETFs).
While the demand scenario is more bullish for later months, we will receive the actual picture as the states start opening one by one. Till then, keep a close tab on InfraCap MLP ETF (AMZA - Free Report) , Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) and VanEck Vectors Oil Refiners ETF CRAK.
Gold-Related Investments Will be in Favor
Gold miners are likely coronavirus beneficiaries as the space added about 45% past month (as of Apr 28, 2020), breezing past the S&P 500 ETF’s (IVV) 12.74% gains. In comparison, gold bullion advanced about 5.6%. With the buzz that reopening may shoot up COVID-19 cases again, gold – a safe-haven asset – should remain in fine fettle this month. Its mining counterparts, in any case, are in good shape.
The Fed’s super-dovish stance since March and the resultant weakness in the greenback, a mammoth government stimulus, uptick in investor sentiment, lower oil prices, cheaper valuation and relatively low debt of the mining companies facilitated the spectacular performance of past month (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).
So, ETFs like iShares MSCI Global Gold Miners ETF (RING - Free Report) , Sprott Gold Miners ETF (SGDM - Free Report) and US Global GO GOLD and Precious Metal Miners ETFGOAU will likely ride the ongoing winning trend.
Online Retail Will Rock But Stay Away From Amazon-Heavy ETFs
Online shopping for groceries, food and essential items has become a mainstream in most parts of the globe amid lockdowns and will remain so after economic reopening. Going by Signifyd’s Ecommerce Pulse data, there has been a 46% surge in overall e-commerce expenditures since late February (read: E-Commerce ETFs Boosted by the Stay-At-Home Economy).
While Amazon (AMZN - Free Report) is a leader in the space, it earnings results say that it plans to spend all Q2 profits – about $4 billion – on coronavirus response. Shares plunged post earnings release. So, it’s better to bet on online retail ETFs that are less heavy on Amazon. Amplify Online Retail ETFIBUY and ProShares Long Online/Short Stores ETF CLIX could serve the purpose. Notably, ETFs like ProShares Online Retail ETF ONLNand VanEck Vectors Retail ETF (RTH - Free Report) are heavy on Amazon.
Healthcare & Biotech: Need of the Hour
Healthcare stocks and ETFs have been in investors’ favor amid the ongoing medical emergency. Large pharma and biotech companies are working on medicines, vaccines and testing kits. Most recently, Gilead (GILD - Free Report) indicated that the trial for coronavirus treatment Remdesivir has met its initial goal. And Remdesivir received the FDA nod for emergency usefor coronavirus as an experimental drug. iShares Nasdaq Biotechnology ETF (IBB - Free Report) and iShares Genomics Immunology and Healthcare ETF IDNA are the ETFs that should be tracked closely.
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Top ETF Stories of April Likely to Hit Headlines Again in May
The month of April was all about coronavirus-led global lockdowns, massive Fed and government stimulus in the United States, unprecedented policy easing in various parts of the globe, the biggest OPEC+ output cut deal, enormous crash in the WTI crude due to storage crisis, and Wall Street’s fast recovery after slipping into a bear market in mid-March (read: Top ETF Stories of First Quarter).
Relentless research on treatments and vaccines, along with talks of the U.S. economy reopening following an improvement in virus cases has given the broader market a boost. Moderate corporate earnings have also led to market strength. Though Wall Street saw a weak start to May due to the relapse of U.S.-China trade war tensions and weakness in some big companies’ earnings, things should smoothen out over the course of the month.
Still, we can’t expect the world to be like it was before the outbreak. So, volatility amid the market rally will be there. A lot depends on the progression of virus cases and its treatments. Against this backdrop, below we highlight a few a key April ETF events that will continue to hog attention in May.
Oil & Gas to Remain Equally Volatile
The month of April would always be known for the ebbs and flows in the WTI crude market due to storage crisis. Due to lockdown-led low demand, ample supplies and drying storage capacity, May WTI crude contract fell to the negative territory on Apr 20, for the first time in history, and the June contract too suffered lately.
WTI crude ETF United States Oil Fund, LP (USO - Free Report) , which was originally designed to track the spot price of WTI crude oil, changed its structure repeatedly to counter the fast slide in oil prices. The fund started betting in favor of longer-term contracts in recent times(read: Oil in Great Contango: Here's How to Play With Crude ETFs).
While the demand scenario is more bullish for later months, we will receive the actual picture as the states start opening one by one. Till then, keep a close tab on InfraCap MLP ETF (AMZA - Free Report) , Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) and VanEck Vectors Oil Refiners ETF CRAK.
Gold-Related Investments Will be in Favor
Gold miners are likely coronavirus beneficiaries as the space added about 45% past month (as of Apr 28, 2020), breezing past the S&P 500 ETF’s (IVV) 12.74% gains. In comparison, gold bullion advanced about 5.6%. With the buzz that reopening may shoot up COVID-19 cases again, gold – a safe-haven asset – should remain in fine fettle this month. Its mining counterparts, in any case, are in good shape.
The Fed’s super-dovish stance since March and the resultant weakness in the greenback, a mammoth government stimulus, uptick in investor sentiment, lower oil prices, cheaper valuation and relatively low debt of the mining companies facilitated the spectacular performance of past month (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).
So, ETFs like iShares MSCI Global Gold Miners ETF (RING - Free Report) , Sprott Gold Miners ETF (SGDM - Free Report) and US Global GO GOLD and Precious Metal Miners ETF GOAU will likely ride the ongoing winning trend.
Online Retail Will Rock But Stay Away From Amazon-Heavy ETFs
Online shopping for groceries, food and essential items has become a mainstream in most parts of the globe amid lockdowns and will remain so after economic reopening. Going by Signifyd’s Ecommerce Pulse data, there has been a 46% surge in overall e-commerce expenditures since late February (read: E-Commerce ETFs Boosted by the Stay-At-Home Economy).
While Amazon (AMZN - Free Report) is a leader in the space, it earnings results say that it plans to spend all Q2 profits – about $4 billion – on coronavirus response. Shares plunged post earnings release. So, it’s better to bet on online retail ETFs that are less heavy on Amazon. Amplify Online Retail ETF IBUY and ProShares Long Online/Short Stores ETF CLIX could serve the purpose. Notably, ETFs like ProShares Online Retail ETF ONLN and VanEck Vectors Retail ETF (RTH - Free Report) are heavy on Amazon.
Healthcare & Biotech: Need of the Hour
Healthcare stocks and ETFs have been in investors’ favor amid the ongoing medical emergency. Large pharma and biotech companies are working on medicines, vaccines and testing kits. Most recently, Gilead (GILD - Free Report) indicated that the trial for coronavirus treatment Remdesivir has met its initial goal. And Remdesivir received the FDA nod for emergency usefor coronavirus as an experimental drug. iShares Nasdaq Biotechnology ETF (IBB - Free Report) and iShares Genomics Immunology and Healthcare ETF IDNA are the ETFs that should be tracked closely.
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 >>