Wall Street was in a mayhem in April due to mounting inflationary pressures, rising rate worries and geopolitical tensions in Russia and Ukraine. The S&P 500, the Dow Jones, the Nasdaq Composite and the Russell 2000, declined 9.11%, 5.3%, 13.5% and 10.9%, respectively. FAANG stocks plus Microsoft lost $1.4 trillion in market value during April, per a MarketWatch article.
As far as rates are concerned, the benchmark treasury yield started the week at 2.85%, hit a high of 2.93% and then closed the week at 2.90%. Fed Chairman Jerome Powell said the central bank is committed to raising rates “expeditiously” to tame inflation. Not only this, the yield curve also inverted to start April.
Against this backdrop, below we highlight a few top ETF stories of April that are worth a watch in May.
Rising Rates to Continue
Since a hawkish Fed caused a rally in long-term rates, ETFs that give shelter against rising rates rose.
Simplify Interest Rate Hedge ETF ( PFIX Quick Quote PFIX - Free Report) gained 16% in April. This ETF is active and does not track a benchmark. The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and to benefit from market stress when fixed-income volatility increases, while offering the potential for income.
Since we are expected to see a 50-bp rate hike in May, PFIX may gain further ahead.
FolioBeyond Rising Rates ETF ( RISR Quick Quote RISR - Free Report) has added 6% past month and is likely to gain in May. Agriculture to Turn Greener?
Russia and Ukraine (two countries involved in the war) are the major exporters of grains. Both countries are major wheat producers. As the conflict is showing no sign of easing, Ukrainian farmers are finding it difficult to plant spring crops. Supply chain disruptions are the other concerns. Hence, agricultural commodities have been exhibiting an uptrend.
iPatha.B Grains Subindex TR ETN ( JJG Quick Quote JJG - Free Report) was up 9.8% in April and may stage a further rebound. Natural Gas May Gather More Steam
Natural gas futures are surging higher on tight supply conditions, adverse weather conditions and declining inventories.
United States Natural Gas Fund, LP ( UNG Quick Quote UNG - Free Report) is up 114.5% so far this year and is up 35% past month. The jump in prices came as the conflict between Russia and Ukraine has sparked fears of global supply disruption in an already tight-supply market. Western countries have slapped severe sanctions against Russia over ongoing Ukraine war that has disrupted trade flows. Sanctions by the United States and other countries will force Russia to supply less natural gas, thereby pushing prices higher. Defensives to Remain in Sweet Spot
There is an old adage “sell in May and go away.” After a brutal April and the worst start to a year since 1939, this May could be tricky for the investment world. The Russia-Ukraine war, high inflation levels, the Federal Reserve’s aggressive stance on rate hikes and China’s zero-Covid policy are keeping investors on the edge, adding to the market gyrations this year. This has made defensive funds like
US Anti-Beta Fund Market Neutral QuantShares ETF ( BTAL Quick Quote BTAL - Free Report) an attractive investment option. BTAL is up 10.2% this year. We can expect a rally in the fund in May too. Dividend Aristocrats Likely to Gain
Companies that have the willingness and ability to pay and grow their dividend over time are called dividend aristocrats. Such activities make them quality picks.
SPDR S&P Dividend ETF ( SDY Quick Quote SDY - Free Report) follows the S&P High Yield Dividend Aristocrats Index, which measures the performance of the highest dividend-yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. The fund SDY yields 2.71% annually. The fund has added 2.12% past month, beating the S&P 500. The winning trend can be seen in May too.