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January Worst Month Since March 2020: ETF Areas Up 10% or More
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Wall Street has been on choppy ride since the start of 2022 due to rising rate worries. The 10-year U.S. Treasury yield soared to its highest point in two years on Jan 18, 2022, hovering around 1.87%. Rates have been rising in the United States on the Fed’s rate hike bets. Higher inflationary expectations emanating from supply chin disruptions as well as higher crude prices should make Fed members comfortable with rate hikes in the coming days.
The Nasdaq, heavy on technology and growth stocks, went into the correction zone. The Nasdaq Composite has lost 12% this year as investors continue to walk out of the high-growth tech shares on surging interest rates. The S&P 500 logged its worst month since March 2020. The index was down about 7%. The Dow Jones has backtracked about 4% while the Russell 2000 was off 12.3% last month.
Against this backdrop, below we highlight a few ETF areas those gained at least 10% in January.
Like in most winters, natural gas prices started receiving warmth from the chills this year. Natural gas futures’ price soared due to weather concerns. There is the forecast of a blizzard that will force millions of Americans to turn on the heat and consumer more natural gas. Analysts at Gelber and Associates said there is talk in the market that a "large producer's inability to make delivery at Henry Hub forced them to cover short positions and put them on the wrong side of one of the most dramatic price escalations in the market’s history," as quoted on Reuters.
Crude oil prices increased to a more than seven-year high and reported six straight weeks of gains to close out January as the geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply crunch. On a weekly basis, the benchmark contracts posted their longest run of gains in the week ending Jan 28 since October. Brent futures topped the $90-level, marking the highest level since October 2014.
Tight oil supplies led the six-month market structure for Brent into steep backwardation of $6.92 a barrel, marking the widest since 2013. Key producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, is falling short of the growth in demand. U.S. output has struggled its way higher even as the rig count has been rising, per energy markets analyst at IHS Markit Steeves, as quoted on CNBC. On the demand side, crude imports in China – the world's biggest importer of the commodity – may bounce back as much as 7% this year, per analysts.
Palladium, silver and palladium prices were on a tear in January. Worries surrounding inflation and escalating Russia-Ukraine tensions led to the gains in palladium. Russia is rich in palladium. Russia's Nornickel is the world's largest palladium producer. Palladium is used in pollution-reducing catalytic converters in gasoline engines. Investors should note that Palladium jumped to a record in May 2021 before slumping and becoming the worst-performing major commodity of 2021. This has corrected the metal’s sky-high valuation.
Rising rates have been the trend recently in the market. Hence, this ETF gained materially in January. This ETF is active and does not track a benchmark. The FolioBeyond Rising Rates ETF is an actively managed exchange-traded fund that seeks to provide protection against rising interest rates while generating current income under stable interest rates.
Cotton
iPatha.B Cotton Subindex TR ETN – Up 12.6%
Global cotton prices are trading at the highest level in the last 10 years. The United States is the largest exporter in the world and the stock piles have declined. American harvest is also down 6% as compared to the average in the last many years and this is creating a potential supply crunch.
Data from Cotlook shows that the global deficit could double in 2022 from where we stand right now, at around 122,000 tons to around 207,000 tons next year, per the CNBC article. Another key producing region India is also suffering from lower sowing (read: 4 Agriculture ETF Areas At a One-Year High: Here's Why).
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January Worst Month Since March 2020: ETF Areas Up 10% or More
Wall Street has been on choppy ride since the start of 2022 due to rising rate worries. The 10-year U.S. Treasury yield soared to its highest point in two years on Jan 18, 2022, hovering around 1.87%. Rates have been rising in the United States on the Fed’s rate hike bets. Higher inflationary expectations emanating from supply chin disruptions as well as higher crude prices should make Fed members comfortable with rate hikes in the coming days.
The Nasdaq, heavy on technology and growth stocks, went into the correction zone. The Nasdaq Composite has lost 12% this year as investors continue to walk out of the high-growth tech shares on surging interest rates. The S&P 500 logged its worst month since March 2020. The index was down about 7%. The Dow Jones has backtracked about 4% while the Russell 2000 was off 12.3% last month.
Against this backdrop, below we highlight a few ETF areas those gained at least 10% in January.
ETFs In Focus
Natural Gas
US Natural Gas Fund (UNG - Free Report) – Up 25.7%
Like in most winters, natural gas prices started receiving warmth from the chills this year. Natural gas futures’ price soared due to weather concerns. There is the forecast of a blizzard that will force millions of Americans to turn on the heat and consumer more natural gas. Analysts at Gelber and Associates said there is talk in the market that a "large producer's inability to make delivery at Henry Hub forced them to cover short positions and put them on the wrong side of one of the most dramatic price escalations in the market’s history," as quoted on Reuters.
Oil
Vaneck Oil Services ETF (OIH - Free Report) – Up 20.5%
Crude oil prices increased to a more than seven-year high and reported six straight weeks of gains to close out January as the geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply crunch. On a weekly basis, the benchmark contracts posted their longest run of gains in the week ending Jan 28 since October. Brent futures topped the $90-level, marking the highest level since October 2014.
Tight oil supplies led the six-month market structure for Brent into steep backwardation of $6.92 a barrel, marking the widest since 2013. Key producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, is falling short of the growth in demand. U.S. output has struggled its way higher even as the rig count has been rising, per energy markets analyst at IHS Markit Steeves, as quoted on CNBC. On the demand side, crude imports in China – the world's biggest importer of the commodity – may bounce back as much as 7% this year, per analysts.
Palladium
Physical Palladium ETF (PALL - Free Report) – Up 19.3%
Palladium, silver and palladium prices were on a tear in January. Worries surrounding inflation and escalating Russia-Ukraine tensions led to the gains in palladium. Russia is rich in palladium. Russia's Nornickel is the world's largest palladium producer. Palladium is used in pollution-reducing catalytic converters in gasoline engines. Investors should note that Palladium jumped to a record in May 2021 before slumping and becoming the worst-performing major commodity of 2021. This has corrected the metal’s sky-high valuation.
Rising Rates
Foliobeyond Rising Rates ETF (RISR - Free Report) – Up 14.6%
Rising rates have been the trend recently in the market. Hence, this ETF gained materially in January. This ETF is active and does not track a benchmark. The FolioBeyond Rising Rates ETF is an actively managed exchange-traded fund that seeks to provide protection against rising interest rates while generating current income under stable interest rates.
Cotton
iPatha.B Cotton Subindex TR ETN – Up 12.6%
Global cotton prices are trading at the highest level in the last 10 years. The United States is the largest exporter in the world and the stock piles have declined. American harvest is also down 6% as compared to the average in the last many years and this is creating a potential supply crunch.
Data from Cotlook shows that the global deficit could double in 2022 from where we stand right now, at around 122,000 tons to around 207,000 tons next year, per the CNBC article. Another key producing region India is also suffering from lower sowing (read: 4 Agriculture ETF Areas At a One-Year High: Here's Why).