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Top & Flop Zones of First Half 2022 and Their ETF

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The first half of 2022 has been extremely challenging for the global stock market. This is especially true against the backdrop of skyrocketing inflation, tightening policies from the central banks worldwide and the ongoing Russia-Ukraine tensions that have made investors jittery.

As the global economy is struggling with skyrocketing inflation and low growth, the World Bank has slashed its global growth forecast with a warning that many countries could fall into recession. Russia’s invasion of Ukraine has magnified the slowdown in the global economy and intensified the damage from the COVID-19 pandemic as the economy slips into a period of stagflation reminiscent of the 1970s.

Notably, the S&P 500 slipped into the bear market in early June and is down nearly 20% this year — the worst since 1970 — as tracked by Dow Jones Market Data Group. Meanwhile, commodities have been on a hot streak this year, buoyed by the shortage of energy and food supplies amid higher demand (read: Wall Street on Track for Worst 1H: 4 Top-Ranked ETFs Win).

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

Best Zones

Energy

Energy prices have been soaring this year with natural gas on a tear buoyed by tight supply conditions, adverse weather conditions and declining inventories. United States Natural Gas Fund (UNG - Free Report) is the biggest winner, gaining 75.1% so far this year. United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.

United States Natural Gas Fund has AUM of $491.7 million and trades in a volume of around 7.2 million shares per day. The fund has 1.11% in expense ratio.

Hedge Fund

Investors flocked to Simplify Interest Rate Hedge ETF (PFIX - Free Report) to combat rising rate worries. Simplify Interest Rate Hedge ETF seeks to provide a hedge against a sharp increase in long-term interest rates and benefit from market stress when fixed-income volatility increases, while providing the potential for income. 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 Gain from Rising Rates).

PFIX has accumulated $325.6 million in its asset base since its debut in May last year and trades in an average daily volume of 220,000 shares. It charges 50 bps in annual fees and has gained 54.2% so far this year.

Long/Short

Long/short ETFs are less volatile, less risky and relatively stable when compared to the market-cap counterparts. These products provide hedging facilities that protect the portfolio from huge losses in turbulent times. The long/short strategy takes the best of both bull and bear prediction by involving buying and short selling of equities at the same time.

KFA Mount Lucas Index Strategy ETF (KMLM - Free Report) is leading in this space, gaining 36.8%. It follows the KFA MLM Index, which consists of a portfolio of twenty-two liquid futures contracts traded on U.S. and foreign exchanges. The index includes futures contracts on 11 commodities, 6 currencies, and 5 global bond markets. These three baskets are weighted by their relative historical volatility, and within each basket, the constituent markets are equal-dollar weighted (read: Long/Short ETFs to Consider Amid Market Turmoil).

KFA Mount Lucas Index Strategy ETF charges 90 bps in annual fees and trades in an average daily volume of 80,000 shares. It has accumulated $135 million in its asset base.

Worst Zones

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. Global X Blockchain ETF (BKCH - Free Report) has lost 75.5%.

Global X Blockchain ETF seeks to invest in companies positioned to benefit from the increased adoption of blockchain technology, including companies in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration. Global X Blockchain ETF holds 25 stocks in its basket with a double-digit allocation to the top firm.

Global X Blockchain ETF has gathered $51.8 million in its asset base and trades in an average daily volume of 170,000 shares. It charges 50 bps in annual fees.

Cannabis

Being a high-growth sector, the cannabis sector has been a victim of a round of broad market sell-off. AdvisorShares Pure Cannabis ETF (YOLO - Free Report) has tumbled 57.6% so far this year. It is an actively managed fund with a dedicated cannabis investment mandate domiciled in the United States. YOLO seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. AdvisorShares Pure Cannabis ETF holds a basket of 27 stocks with a double-digit exposure to the top two firms. American firms make up 61.4% of the portfolio, followed by a 28.7% share of the Canadian firms.

AdvisorShares Pure Cannabis ETF has gathered $79.3 million in its asset base and charges 76 bps in annual fees. YOLO trades in an average daily volume of 80,000 shares.

Meme Stocks

Roundhill MEME ETF (MEME - Free Report) has shed 54%. Roundhill MEME ETF is the first ETF globally explicitly designed to track the performance of meme stocks. It tracks the Solactive Roundhill Meme Stock Index, which consists of equal-weighted U.S. listed equity securities that exhibit a combination of elevated social media activity and high short interest. Roundhill MEME ETF holds 25 stocks in its basket, with each making up for less than 5% of the assets (read: Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most).

Roundhill MEME ETF has amassed $1 million in its asset base and charges 69 bps in annual fees. It trades in an average daily volume of 5,000 shares.
 

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