February was pretty volatile for Wall Street. Though the start of the month was rocky due to rising rate worries and the Russia-Ukraine conflict, investors digested those threats somewhat at the end of the month. Plus, geopolitical crisis boosted safe-haven assets like U.S. treasuries, which in turn weighed on long-term treasury yields. This benefited stocks somewhat.
Overall, the S&P 500 (down 3.1%), the Nasdaq Composite (down 3.43%) and the Dow Jones (down 3.5%) recorded losses. Only the small-cap Russell 2000 (up 0.97%) managed to remain in the green. With Russia-Ukraine war taking an ugly turn, things will likely remain volatile in March as Western sanctions turned harsh to close out February. Plus, the Fed is highly likely to hike rates this month.
Though rate hike move is already baked in the current valuation, the Fed’s rhetoric will play a crucial in regulating the market. Hence, it is worth figuring out which ETF events of February would prevail in March so that investors can prepare accordingly.
Russia’s Invasion of Ukraine
The war between the duo took an ugly shape in late February. Russian President Vladimir Putin put his country’s nuclear deterrence forces on high alert Sunday. Sanctions against Russian officials and entities continue to mount as an anti-war wave swept the world. Among some of the important sanctions, Russian banks are barred from SWIFT. General Motors and Harley Davidson put off some business in Russia. BP Plc will exit from stake in Russia’s Rosneft.
Thanks to rising sanctions, the Russian ruble slumped about 30% against the U.S. dollar to start the week in an all-time low as markets assessed the impact of sanctions on Russian assets. Russia central bank more than doubled key interest rate to 20% to boost tumbling ruble. So, keep a close watch on
VanEck Russia ETF ( RSX Quick Quote RSX - Free Report) . The key Russia ETF slumped about 53% past month. Russia is expected to retaliate against sanctions on aviation industry, Kremlin says, per Reuters. Oil Price Rally
Russia is energy-rich. And Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement. Oil breached $100 for the first time since 2014.
United States Brent Oil Fund, LP (BNO) is up 12.9% past month amid heightened tensions in East Europe. So, the energy sector can be considered for short-term gains should the geopolitical tensions continue. For this, investors may try ETFs like iShares U.S. Oil Equipment & Services ETF ( IEZ Quick Quote IEZ - Free Report) .
In any case, oil prices have been rising since the beginning of 2022. The upside in crude oil prices was triggered by a variety of factors like easing Omicron variant concerns, outages in Libya causing supply shortages and less OPEC+ output. The space may produce strong retuns in March.
Gold’s Best Month Since May?
Gold probably recorded the best month since May as its safe-haven appeal increased on Ukraine crisis. SPDR Gold Shares (
GLD Quick Quote GLD - Free Report) added about 6.8% past month. U.S. inflation is also red-hot. And gold is also viewed as an inflation-hedging asset. Leveraged gold ETF ProShares Ultra Gold ( UGL Quick Quote UGL - Free Report) has added about 13.9%. Top Sectors: Energy, Clean Energy, Materials, Defense
A few sectors emerged winners in February due to the Russia-Ukraine war. Those sectors are Defense, Energy, Clean Energy, Cyber Security and Materials. While any kind of warfare or military strike means increased purchase and usage of weapons, benefiting ETFs like
SPDR S&P Aerospace & Defense ETF ( XAR Quick Quote XAR - Free Report) (up 11.6% past month), chances of heavy cyberattack on the global level have come to the fore. week. Volt Cloud and Cybersecurity Disruption ETF ( VCLO Quick Quote VCLO - Free Report) (up 4.4% past month) has become beneficiary of such apprehension.
Clean energy stocks have registered an upswing due to the jump in fossil fuels. The sheer jump in the conventional energy sector made the prospects of the alternative energy sector lucrative.
Invesco Solar ETF ( TAN Quick Quote TAN - Free Report) has gained about 10.4% past month (as of Feb 27, 2022). Global X Disruptive Materials ETF ( DMAT Quick Quote DMAT - Free Report) has added 14.5% in the month as Ukraine and Russia are major producers of several metals ranging from uranium, titanium, nickel, aluminum, iron ore and steel. Can Upbeat U.S. Retail Sales be Sustained in March?
Retail sales in the United States jumped 3.8% sequentially in January 2022 despite inflationary pressure, much better than market forecast of a 2% rise.
Although the retail sales data aren’t adjusted for price changes, which makes the figures appear bigger, the report suggests consumer spending in the first quarter has been steady.
The stronger January data could also because of the easy comparison as December witnessed a slump in sales. Ian Shepherdson, chief economist at Pantheon Macroeconomics now expects U.S. first-quarter consumption to be on its way to rise by about 5%, with GDP growth at about 4%, double their previous forecast, as quoted on Bloomberg.
Although we expect a sales slowdown in the next reading, overall GDP growth should be steady. This should benefit the small-cap ETF Zacks Rank #2 (Buy)
Vanguard SmallCap Value ETF ( as these stocks focus more on domestic economy. Geopolitical tensions are also less likely to bother the segment (read: VBR Quick Quote VBR - Free Report) 6 Reasons to Buy Small-Cap ETFs Now).