Wall Street has been steady in July despite the rise in coronavirus cases. SPDR S&P 500 (SPY) (up 5.9%), SPDR Dow Jones Industrial Average ETF (DIA) (up 2.5%) and Invesco QQQ ETF (QQQ) (up 7%) have all returned nicely due to fiscal and monetary stimulus, coronavirus vaccine hopes, pent-up consumer demand and decent earnings releases.
Against this backdrop, below we highlight a few top stories of July and its impact on the ETF world.
Rise in Global Virus Cases
As the global economies started reopening in the second half of the second quarter, virus cases started shooting up. The United States was no exception with several states like California, Arizona, Florida and Texas reissuing shutdowns. No wonder, The U.S. Global Jets ETF (JETS - Free Report) has lost 5.7% in July. The pain for airlines stocks is well known amid coronavirus-led flight restrictions.
Rising Vaccine Hopes
U.S. biotech company Moderna (MRNA - Free Report) probably has been the most-promising candidate in the vaccine research field. Moderna’s vaccine for COVID-19 showed that it was safe and triggered immune responses in all 45 healthy volunteers in an ongoing early-stage study. Moderna had conducted two tests in May and began phase 3 tests with 30,000 volunteers on Jul 27. Shares have jumped 26.7% so far in July. Moderna has presence in ETFMG Treatments Testing and Advancements ETF (GERM - Free Report) .
RNA vaccine candidate from the collaboration between U.S.-based Pfizer (PFE) and German pharmaceutical company BioNtech is also showing promise. On Jul 27, Pfizer Inc. and BioNTech announced the start of a global (except for China) phase 2/3 safety and efficacy clinical study.
EU Pandemic Deal Done
After a tough negotiation, European Union leaders agreed on a massive stimulus plan for their coronavirus-shattered economies in one of the longest EU summits in history. Notably, the European Commission unveiled a plan at the end of May to borrow 750 billion euros on the market and then disburse to EU countries, which will include 500 billion euros in grants and 250 billion euros in loans (read: Bet on Europe ETFs After a Key Pandemic Deal).
The initiative was initially viewed as incredible as there were big differences among nations on the allocation of the stimulus between grants and loans. However, the deal finally got through. Invesco CurrencyShares Euro Currency Trust (FXE - Free Report) has been a key beneficiary (up 4.9%) of the deal.
Silver stole the show with prices climbing to the highest level in nearly four years. About 50% of the metal’s total demand comes from industrial applications. So, the reopening of global economies is helping silver more than the yellow metal (read: Here's Why Silver Outshining Gold ETFs).
Overall, increase in investment demand, pick-up in industrial activity and investors’ appetite for alternatives to the safe-haven asset gold (which is pretty pricey at the current level) has led to the silver rally. Growth in the global solar PV industry, a likely rebound in global computer shipments, as well as new sources of demand for sensors used in IoT and OLED lighting are providing a boost to silver demand.
A raft of global stimulus, including the latest EU deal of borrowing 750 billion euros, worked wonders for this white metal in the near term too. ETRACS UBS Bloomberg CMCI Silver Total Return ETN (USV - Free Report) (40.5%) and ETFMG Prime Junior Silver Miners ETF (SILJ) (up 37.9%) have been among the key gainers in this field.
Clean Energy Keeps Shining
Clean energy stocks and ETFs have also maintained their winning spree. “Growing consumer electric vehicle adoption, state expansions of charging infrastructure, falling battery prices and increased solar-storage installations” have acted as a tailwind for the U.S. clean energy sector for the past few quarters.
Apart from the United States, Europe and China have been focusing greatly on this area. If this was not enough, the coronavirus outbreak has been acting as a boon to the segment. Researchers recently reported that cleaner air caused by lockdowns has caused more sunlight to reach solar panels, which has enhanced clean energy production. Invesco Solar ETF (TAN) (up 24.7%) and First Trust NASDAQ Clean Edge Green Energy Index ETF (QCLN - Free Report) (up 22.5%) have been the key winners.
Worst-Ever U.S. Economic Contraction in Q2
The U.S. economy shrank at the sharpest rate on record in the second quarter of 2020, affirming the fears about the coronavirus-led slowdown. The second-quarter GDP fell 32.9% sequentially in Q2 versus analysts’ expectation of 34.5%. A sharp fall (34.6%) in consumer spending has led to the downturn.
However, since the second quarter reflected the height of lockdown period, GDP data came in harsh. Otherwise, latest retail sales data showed improvement in consumers’ buying pattern. Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) thus has added more than 8% in the month.
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