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Top and Flop ETFs of Q1

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The first quarter of 2022 has been extremely volatile for the global stock market. While inflationary pressures, tightening policies from the central banks worldwide and a war in Ukraine made 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 Fed raised rates by 25 basis points (bps) to 0.25-0.50% and signaled hikes in all the six remaining meetings this year to tackle the fastest inflation in four decades even as risks to economic growth mount. Fed Chair Jerome Powell showed confidence that the American economy is strong enough to withstand tighter monetary policy. This has renewed investors’ interest in riskier assets.

Meanwhile, commodities have been enjoying a hot streak in March. Inflationary pressure along with the tensions between Moscow and the Western countries has pushed commodity prices to levels not seen since the financial crisis. Aluminum prices skyrocketed after Australia decided to ban alumina and bauxite exports to Russia. Nickel saw wild swings in recent weeks with price surges, technical glitches and trading suspensions, while zinc surged on concerns that high energy costs will lead to further smelter curtailments (read: 5 ETFs Leading the Commodity Rally in March).

Oil prices hit $130 per barrel in early March before retreating on another wave of lockdown, which may impact demand in the world's biggest crude importer. Meanwhile, wheat and corn prices have also been on the rise with the ongoing war hitting supplies in several parts of the world.

Given this, we have highlighted the three ETFs each from the best and worst performing zones of first-quarter 2022:

Best Zones

Nickel

iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN - Free Report) jumped 58.1%. It follows the Bloomberg Nickel Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on nickel (read: 5 ETFs Leading the Commodity Rally in March).

iPath Series B Bloomberg Nickel Subindex Total Return ETN has been able to manage $75 million in AUM and trades in a paltry volume of roughly 108,000 shares per day. Its expense ratio is 0.45%.

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 54.6% 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 $4 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees and trades in an average daily volume of 1.2 million shares. The product has a Zacks ETF Rank #3 (Hold) with a High-risk outlook (read: 5 Sector ETFs That Crushed the Market in Q1).

Materials

As prices of various metals have been on the rise, the metals & mining ETFs have been witnessing solid growth. SPDR S&P Metals & Mining ETF (XME - Free Report) gained 37.8%. It offers broad exposure to the U.S. metal and mining industry by tracking the S&P Metals and Mining Select Industry. It holds 32 stocks in its basket, with steel firms accounting for 42.9% of the portfolio, while coal & consumable fuels, aluminum and gold round off the next two spots with double-digit exposure each.

SPDR S&P Metals & Mining ETF has 0.35% in expense ratio and has AUM of $3.6 billion. It trades in an average daily volume around 7.4 million shares.

Worst Zones

Russia

Russia stock market crashed after president Vladimir Putin launched an attack on Ukraine. The stock market trading halted for a month and resumed last week. iShares MSCI Russia ETF (ERUS - Free Report) has tumbled 81.2% so far this year. It offers a broad exposure to Russia’s stock market by tracking the MSCI Russia 25 / 50 Index. iShares MSCI Russia ETF holds 26 stocks in its basket.

iShares MSCI Russia ETF has AUM of $1 million and charges 57 bps in annual fees. It trades in an average daily volume of 703,000 shares and has a Zacks ETF Rank #3 with a High risk outlook.

Technology

The technology sector has been caught in a selling spree 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. Simplify Volt Pop Culture Disruption ETF (VPOP - Free Report) has lost 29.2%. It is an actively managed fund, providing investors concentrated exposure to media platform leaders across streaming, social media and Internet of Things.

Simplify Volt Pop Culture Disruption ETF has amassed $1 million in its asset base. The product has an expense ratio of 0.95% and trades in a paltry volume of 1,000 shares.

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 27%. 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.

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.