Wall Street had a downbeat August, with the S&P 500 losing about 4.4% past month (as of Aug 31, 2022), the Dow Jones losing 3.6% and the Nasdaq Composite falling about 6.5%. The small-cap index Russell 2000 lost about 3.2%. Rising rate worries at the end of the month made investors jittery, but a host of upbeat corporate earnings as well as data points kept investors’ optimism intact.

New York Fed President John Williams recently said he expects interest rates to continue moving higher and remain at those levels until inflation is controlled, as quoted on CNBC. Fed chief Powell too recently commented that taming U.S. inflation will cause "pain" for American families and businesses as rate hikes will continue.

Per CME group, there is a 70.5% probability of a 75-bp rate hike in the September meeting, while 29.5% probability of a 50-bp rate hike. In response to Fed rate hike bets, the two-year U.S. treasury yield jumped from 2.90% at the start of the month to 3.46% on Aug 30, 2022.

Among the key developments in the month, the important ones were cooling inflation. Inflation in the United States moderated slightly as energy and gasoline prices dropped. U.S. President Joe Biden has signed a $740 billion climate change, healthcare and tax ‘Inflation Reduction Act.’ The coming Democratic message will likely focus on the aspects of the bill that could improve Americans' lives immediately — including tax credits for electric vehicles and energy-efficient home improvements and key health care provisions.

Agricultural products won in August. Uranium miners also gained in the month. Japan's prime pinister Fumio Kishida said the nation resumed idled nuclear plants and will focus on developing next-generation reactors to prepare for the soaring energy costs amid the Ukraine crisis.

Against this backdrop, below, we highlight a few top-performing ETFs of August that gained at least 15% past month (as of Aug 30, 2022).

ETFs in Focus

AdvisorShares Psychedelics ETF (PSIL Quick QuotePSIL - Free Report) – Up 33.6%

AdvisorShares Psychedelics ETF invests in the emerging psychedelic drugs sector, offering exposure to those biotechnology, pharmaceutical and life sciences companies we see as leading the way in this nascent industry. It is an actively managed fund and holds 33 stocks in its basket with a double-digit concentration on the top two firms. 

Credit Suisse S&P MLP ETN – Up 21%

Oil prices jumped recently after Saudi indicated that OPEC could slash output. The Organization of the Petroleum Exporting Countries plans to lower production to correct the recent oil price decline driven by poor futures market liquidity and recessionary fears. The decision has been taken despite the fact that the oil market is extremely tight. No wonder, this MLP ETF gained massively in the month.

iPatha.B Cotton Subindex TR ETN – Up 18.8%

Cotton prices stayed high for most of August on reports of crop losses due to pest attacks and heavy rains across cotton-growing areas in the key producer India, per a CNBC article.

Turkey iShares MSCI ETF (TUR Quick QuoteTUR - Free Report) – Up 17.8%

The Borsa Istanbul 100 index jumped to a fresh record in August as investors continued to use equities as a hedge for surging prices and a falling lira. The central bank unexpectedly slashed its key rate by 100bps to 13% in its August meeting, adding to the 600 bps reduction of the key rate since September 2021, per tradingeconomics. This has bolstered the equity market.

Kraneshares Global Carbon Offset Strategy ETF – Up 17.4%

This ETF is active and does not track a benchmark. The KraneShares Global Carbon Offset Strategy ETF provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. The rise of de-carbonization has made the strategy a winner.