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The start of 2022 has been extremely volatile for the global stock market. While inflationary pressures, tightening policies from the central banks worldwide and geopolitical issues are making investors jittery, an improving economy, rising consumer confidence and solid corporate earnings are acting as catalysts.
Central banks across the globe have raised interest rates to tame inflation, while some are in the process of tightening. The U.S. consumer price index jumped 7.5% year over year in January, marking the biggest 12-month gain since February 1982. The high inflation has set the stage for the first interest rate hike in the United States for this year as early as March. Wall Street analysts are predicting as many as seven rate hikes this year.
While the sheen for gold and silver has faded in the commodity world, industrial metals and energy have become red hot. Industrial metals like copper, platinum and tin surged on optimism over economic recovery. Oil price is spiking and hovering near $100 per barrel on rising demand and tightening supplies (read: ETFs to Gain & Lose From Higher Oil Price).
Given this, we have highlighted the five best-performing zones and their ETFs halfway through first-quarter 2022:
Best Zones
Energy
The energy sector is the top performer this year as oil prices are rising further on supply disruptions and unprecedented demand. VanEck Vectors Oil Services ETF (OIH - Free Report) has been the biggest winner, gaining 34.5% so far this year. It tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. VanEck Vectors Oil Services ETF holds 25 stocks in its basket with double-digit allocation each in the top two firms.
With AUM of $2.7 billion, VanEck Vectors Oil Services ETF charges 35 basis points (bps) in annual fees and trades in an average daily volume of 940,000 shares. The product has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
Hedge Fund
Investors are flocking to Simplify Interest Rate Hedge ETF (PFIX - Free Report) to combat rising rate worries. It seeks to provide a hedge against a sharp increase in long-term interest rates. It buys put options on longer-term Treasury bonds to offer “the most liquid and the most cost-efficient way of getting interest rate protection.” Simplify Interest Rate Hedge ETF is the first ETF providing a simple, direct and transparent interest rate hedge (read: ETFs to Play as U.S. Benchmark Treasury Yield Tops 2%).
PFIX has accumulated $141.4 million in its asset base and trades in an average daily volume of 57,000 shares. It charges 50 bps in annual fees and has gained 21.4% midway Q1.
Palladium
Palladium price has been rising, prompted by a global shift from diesel to gasoline and hybrid vehicles that led to higher demand for the metal and resulted in the speculation of supply deficit. Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) is up 21%. It seeks to match the price of palladium. Aberdeen Standard Physical Palladium Shares ETF owns palladium bullion in plates or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank (read: 5 ETFs at the Heart of the Commodity Boom).
Aberdeen Standard Physical Palladium Shares ETF has amassed $388.6 million in its asset base and trades in a lower volume of about 42,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
Worst Zones
Shipping
The best performing ETF of 2021 lost momentum this year with easing demand and subsiding supply chain pressures. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) , which is the only freight futures ETF exclusively focused on dry bulk shipping, has plunged 24.8% so far this year. It provides exposure to the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices. Breakwave Dry Bulk Shipping ETF holds freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures based on the prevailing calendar schedule.
Breakwave Dry Bulk Shipping ETF has accumulated about $61.6 million in AUM and trades in a good volume of about 178,000 shares per day on average. It charges a higher annual fee of 3.32%.
Technology
The technology sector has been caught in a selling spree this year triggered by rate hikes. This is because it relies on easy borrowing for superior growth, and its value depends heavily on future earnings. A rise in long-term yields lowers the present value of companies’ future earnings, sparking fears of overvaluation. ARK Innovation ETF (ARKK - Free Report) has lost 23%. This is an actively managed fund investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. In total, the fund holds 41 securities in its basket.
ARK Innovation ETF has gathered $12.2 billion in its asset base and charges 75 bps in fees per year from investors. It trades in a volume of 22 million shares per day on average.
Biotech
The biotech sector has also been the victim of the round of broad market sell-off. Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) has shed 22%. This fund offers exposure to companies with promising drugs in clinical human trials that have not yet been approved by the FDA or gone into production. Virtus LifeSci Biotech Clinical Trials ETF follows the LifeSci Biotechnology Clinical Trials Index and holds 196 securities in its basket (read: How Are Biotech ETFs Reacting to These Q4 Earnings Releases?).
Virtus LifeSci Biotech Clinical Trials ETF has amassed $24.7 million in its asset base and charges 79 bps in fees per year from its investors. It trades in a lower average daily volume of around 4,000 shares and carries a Zacks ETF Rank #3 with a High-risk outlook.
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Top and Flop ETFs At Midway Q1
The start of 2022 has been extremely volatile for the global stock market. While inflationary pressures, tightening policies from the central banks worldwide and geopolitical issues are making investors jittery, an improving economy, rising consumer confidence and solid corporate earnings are acting as catalysts.
Central banks across the globe have raised interest rates to tame inflation, while some are in the process of tightening. The U.S. consumer price index jumped 7.5% year over year in January, marking the biggest 12-month gain since February 1982. The high inflation has set the stage for the first interest rate hike in the United States for this year as early as March. Wall Street analysts are predicting as many as seven rate hikes this year.
While the sheen for gold and silver has faded in the commodity world, industrial metals and energy have become red hot. Industrial metals like copper, platinum and tin surged on optimism over economic recovery. Oil price is spiking and hovering near $100 per barrel on rising demand and tightening supplies (read: ETFs to Gain & Lose From Higher Oil Price).
Given this, we have highlighted the five best-performing zones and their ETFs halfway through first-quarter 2022:
Best Zones
Energy
The energy sector is the top performer this year as oil prices are rising further on supply disruptions and unprecedented demand. VanEck Vectors Oil Services ETF (OIH - Free Report) has been the biggest winner, gaining 34.5% so far this year. It tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. VanEck Vectors Oil Services ETF holds 25 stocks in its basket with double-digit allocation each in the top two firms.
With AUM of $2.7 billion, VanEck Vectors Oil Services ETF charges 35 basis points (bps) in annual fees and trades in an average daily volume of 940,000 shares. The product has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
Hedge Fund
Investors are flocking to Simplify Interest Rate Hedge ETF (PFIX - Free Report) to combat rising rate worries. It seeks to provide a hedge against a sharp increase in long-term interest rates. It buys put options on longer-term Treasury bonds to offer “the most liquid and the most cost-efficient way of getting interest rate protection.” Simplify Interest Rate Hedge ETF is the first ETF providing a simple, direct and transparent interest rate hedge (read: ETFs to Play as U.S. Benchmark Treasury Yield Tops 2%).
PFIX has accumulated $141.4 million in its asset base and trades in an average daily volume of 57,000 shares. It charges 50 bps in annual fees and has gained 21.4% midway Q1.
Palladium
Palladium price has been rising, prompted by a global shift from diesel to gasoline and hybrid vehicles that led to higher demand for the metal and resulted in the speculation of supply deficit. Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) is up 21%. It seeks to match the price of palladium. Aberdeen Standard Physical Palladium Shares ETF owns palladium bullion in plates or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank (read: 5 ETFs at the Heart of the Commodity Boom).
Aberdeen Standard Physical Palladium Shares ETF has amassed $388.6 million in its asset base and trades in a lower volume of about 42,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High-risk outlook.
Worst Zones
Shipping
The best performing ETF of 2021 lost momentum this year with easing demand and subsiding supply chain pressures. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) , which is the only freight futures ETF exclusively focused on dry bulk shipping, has plunged 24.8% so far this year. It provides exposure to the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices. Breakwave Dry Bulk Shipping ETF holds freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures based on the prevailing calendar schedule.
Breakwave Dry Bulk Shipping ETF has accumulated about $61.6 million in AUM and trades in a good volume of about 178,000 shares per day on average. It charges a higher annual fee of 3.32%.
Technology
The technology sector has been caught in a selling spree this year triggered by rate hikes. This is because it relies on easy borrowing for superior growth, and its value depends heavily on future earnings. A rise in long-term yields lowers the present value of companies’ future earnings, sparking fears of overvaluation. ARK Innovation ETF (ARKK - Free Report) has lost 23%. This is an actively managed fund investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. In total, the fund holds 41 securities in its basket.
ARK Innovation ETF has gathered $12.2 billion in its asset base and charges 75 bps in fees per year from investors. It trades in a volume of 22 million shares per day on average.
Biotech
The biotech sector has also been the victim of the round of broad market sell-off. Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) has shed 22%. This fund offers exposure to companies with promising drugs in clinical human trials that have not yet been approved by the FDA or gone into production. Virtus LifeSci Biotech Clinical Trials ETF follows the LifeSci Biotechnology Clinical Trials Index and holds 196 securities in its basket (read: How Are Biotech ETFs Reacting to These Q4 Earnings Releases?).
Virtus LifeSci Biotech Clinical Trials ETF has amassed $24.7 million in its asset base and charges 79 bps in fees per year from its investors. It trades in a lower average daily volume of around 4,000 shares and carries a Zacks ETF Rank #3 with a High-risk outlook.