Despite a weak start, February saw a steady rally through the end of the month, sending the U.S. stock markets to another record high. The Dow Jones posted its best monthly percentage gain of 4% since January 2013 while the S&P 500 added 4.3%, representing the best month since October 2013.
This suggests a sharp reversal in investors’ mood, which was dampened by the turmoil in emerging markets in January and some recent sluggish economic indicators. One of the he biggest reason behind the rally is strong corporate earnings (read: Buy these ETFs to Profit from the Earnings Season).
In addition, the Fed Chair Janet Yellen confirmed the continuation of monetary stimulus cut, citing that brutal weather had played a key role in the U.S. soft data. Moreover, recent consumer sentiment survey has been quite encouraging with the latest reading indicating a pickup in consumer spending. The initial reading in the Thomson Reuters/University of Michigan survey came in at 81.6 for February, up from 81.2 in January.
Given this, several ETFs saw a spike, gaining double digits in the month, and are leading the way in 2014. Top performers are from the commodity-investing world with coffee and sugar ETFs being on the rise. Both coffee and sugar are experiencing a surge in their prices on the heels of extreme weather conditions in the top growing region – Brazil – that is curtailing the production of these commodities.
The iPath Dow Jones-UBS Coffee Subindex Total Return ETN (JO - ETF report) and iPath Pure Beta Coffee ETN (CAFE - ETF report) surged more than 50% each in February while iPath Dow Jones-UBS Sugar Subindex Total Return ETN (SGG - ETF report) and iPath Pure Beta Sugar ETN (SGAR - ETF report) ) are up over 17% (read: Coffee ETFs Soar on Brazil Drought Concerns)
Another top performer is the Guggenheim Solar ETF (TAN - ETF report) , which is continuing its bull run this year as well. Most of the gains in this corner of the market stems from robust panel installations, a focus on high beta and small cap stocks, and investors’ desire to add growing companies to their portfolio. The ETF has performed remarkably well, gaining more than 20% alone in the month.
Other top performers include mining ETFs like Global X Pure Gold Miners ETF , Global X Gold Explorers ETF and PureFunds ISE Junior Silver ETF (SILJ - ETF report) . Both gold mining ETFs are up nearly 15.5% while the silver mining ETF added 13% in the month.
Acting as a leveraged play on underlying precious metals, mining ETFs are on the upswing thanks to rising gold and silver prices. Uncertainties in the economic growth as well as the Fed monetary stimulus have compelled investors to shift their focus on the safe haven avenues like gold and silver (read: 3 Mining ETFs Crushing The Market in 2014).
Volatility ETFs, linked to the CBOE Volatility Index or the VIX, crashed at the end of the month as the fear factor subsided in the market. These products tend to outperform when markets are falling or fear levels are high, neither of which have happened lately due to mixed economic data. As a result, C-Tracks on Citi Volatility Index ETN turned out to be the major loser of the month, shedding nearly 14%.
Among the emerging markets, Global X Nigeria Index ETF (NGE - ETF report) and VelocityShares Emerging Market DR ETF (EMDR) led the slump on falling currencies (see: all the Emerging market ETFs here).
The funds are hit the most by signs of a Chinese slowdown and the growing political and financial instability in countries like Turkey, Brazil, Indonesia, India, South Africa, Argentina and Ukraine. Both funds lost about 7% in the month.
Other worst performers of February include Market Vectors Russia Small-Cap ETF (RSXJ), iShares MSCI Russia Capped ETF (ERUS) and db X-trackers MSCI Mexico Hedged Equity Fund (DBMX). These products fell about 5% each (read: 3 ETFs Tumble Most on Emerging Market Sell-Off).
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