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Wall Street has been flying high as 2023 draws to a close. The Dow Jones Industrial Average has been hitting a series of record highs, while the S&P 500 is just a fraction away from the peak reached in January 2022. The Nasdaq Composite Index is on track for the biggest annual gain since 2003.
The artificial intelligence (AI) boom, the surge in "Magnificent Seven" stocks, cooling inflation, and the optimism that the Fed is done with interest rate hikes act as major catalysts. The economy has withstood the worst of the Fed’s policy tightening and is now expected to enjoy a major policy shift. Federal Reserve Chair Jerome Powell, in the latest meeting, hinted at three rate cuts of 75 bps for the next year as inflation is easing and the economy is holding up better (read: Magnify Gains in 2024 With "Magnificent Seven" ETFs).
On the commodity side, gold regained sheen on a decline in bond yields and a weaker U.S. dollar. Additionally, the Israel-Hamas conflict has raised safe-haven buying, making gold attractive. The bullion is up more than 14% this year. A potential shift in monetary policy presents an intriguing scenario for gold investors looking into 2024. Meanwhile, the most volatile commodity, oil, is on track to end 10% lower, marking the first annual decrease in two years as demand concerns have started to build up in recent weeks.
Further, the U.S. dollar is poised for its worst year since 2020, dragged down by market expectations that the Fed could begin easing rates as early as next March. This will reverse the two straight years of gains.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones of 2023.
Bitcoin has exhibited a remarkable performance this year, outpacing other assets like global stocks and gold. The world's largest cryptocurrency started 2023 just above $16,000 and climbed to a 12-month high of $45,000 in early December. The surge came on the back of broad enthusiasm about U.S. interest rate cuts and the imminent regulatory approval for Bitcoin ETFs (read: Bitcoin ETFs Set to Explode in 2024 After a Marvelous 2023).
Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining. Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a double-digit concentration on the top five firms. It has amassed $71.1 million in its asset base while trading in an average daily volume of 296,000 shares. WGMI charges 75 bps in annual fees.
Homebuilding - iShares U.S. Home Construction ETF (ITB - Free Report) ) – Up 69.6%
The U.S. housing sector has shown improvement as a decline in mortgage rates prompted an increase in prospective buyers, leading to an uptick in sales. Mortgage rates fell below 7% for the first time since August last week and are hovering at the lowest level since July, reigniting some life in the housing market. iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index (read: Homebuilder ETFs 2024 Prospects Appear Bright).
With AUM of $2.5 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 3 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 (Hold).
Growth - Fidelity Blue Chip Growth ETF (FBCG - Free Report) ) – Up 58.8%
Growth investing is a momentum play and tends to outperform in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 156 securities in its basket.
Fidelity Blue Chip Growth ETF charges 59 bps in annual fees and trades in an average daily volume of 258,000 shares. It has AUM of $1 billion.
After a strong appetite for low-risk ETFs due to the rout in the U.S. bond market, the appeal for these products has diminished in recent months. Simplify Tail Risk Strategy ETF seeks to provide income and capital appreciation while protecting against significant downside risk to investors by hedging diversified portfolios against severe equity market sell-offs.
Simplify Tail Risk Strategy ETF has amassed $2.6 million in its asset base and charges 1.64% in annual fees from investors. It trades in a volume of 806,000 shares a day on average.
Carbon - KraneShares Global Carbon Offset Strategy ETF ) – Down 90.2%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
KraneShares Global Carbon Offset Strategy ETF has gathered $0.9 million in its asset base and trades in a volume of 17,000 shares a day on average. It charges 79 bps in annual fees.
Volatility products have been lagging this year as they underperform when the stock market surges. ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
ProShares VIX Short-Term Futures ETF has amassed $166.9 million in AUM and charges 85 bps in fees per year. It trades in a volume of 3 million shares per day on average.
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Top and Flop ETF Zones of 2023
Wall Street has been flying high as 2023 draws to a close. The Dow Jones Industrial Average has been hitting a series of record highs, while the S&P 500 is just a fraction away from the peak reached in January 2022. The Nasdaq Composite Index is on track for the biggest annual gain since 2003.
The artificial intelligence (AI) boom, the surge in "Magnificent Seven" stocks, cooling inflation, and the optimism that the Fed is done with interest rate hikes act as major catalysts. The economy has withstood the worst of the Fed’s policy tightening and is now expected to enjoy a major policy shift. Federal Reserve Chair Jerome Powell, in the latest meeting, hinted at three rate cuts of 75 bps for the next year as inflation is easing and the economy is holding up better (read: Magnify Gains in 2024 With "Magnificent Seven" ETFs).
On the commodity side, gold regained sheen on a decline in bond yields and a weaker U.S. dollar. Additionally, the Israel-Hamas conflict has raised safe-haven buying, making gold attractive. The bullion is up more than 14% this year. A potential shift in monetary policy presents an intriguing scenario for gold investors looking into 2024. Meanwhile, the most volatile commodity, oil, is on track to end 10% lower, marking the first annual decrease in two years as demand concerns have started to build up in recent weeks.
Further, the U.S. dollar is poised for its worst year since 2020, dragged down by market expectations that the Fed could begin easing rates as early as next March. This will reverse the two straight years of gains.
Given this, we have highlighted three ETFs, each from the best and worst-performing zones of 2023.
Best ETFs
Bitcoin - Valkyrie Bitcoin Miners ETF (WGMI - Free Report) ) – Up 370.9%
Bitcoin has exhibited a remarkable performance this year, outpacing other assets like global stocks and gold. The world's largest cryptocurrency started 2023 just above $16,000 and climbed to a 12-month high of $45,000 in early December. The surge came on the back of broad enthusiasm about U.S. interest rate cuts and the imminent regulatory approval for Bitcoin ETFs (read: Bitcoin ETFs Set to Explode in 2024 After a Marvelous 2023).
Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining. Valkyrie Bitcoin Miners ETF holds 22 stocks in its basket with a double-digit concentration on the top five firms. It has amassed $71.1 million in its asset base while trading in an average daily volume of 296,000 shares. WGMI charges 75 bps in annual fees.
Homebuilding - iShares U.S. Home Construction ETF (ITB - Free Report) ) – Up 69.6%
The U.S. housing sector has shown improvement as a decline in mortgage rates prompted an increase in prospective buyers, leading to an uptick in sales. Mortgage rates fell below 7% for the first time since August last week and are hovering at the lowest level since July, reigniting some life in the housing market. iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index (read: Homebuilder ETFs 2024 Prospects Appear Bright).
With AUM of $2.5 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 3 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 (Hold).
Growth - Fidelity Blue Chip Growth ETF (FBCG - Free Report) ) – Up 58.8%
Growth investing is a momentum play and tends to outperform in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 156 securities in its basket.
Fidelity Blue Chip Growth ETF charges 59 bps in annual fees and trades in an average daily volume of 258,000 shares. It has AUM of $1 billion.
Worst ETFs
Low Risk - Simplify Tail Risk Strategy ETF ) – Down 97.9%
After a strong appetite for low-risk ETFs due to the rout in the U.S. bond market, the appeal for these products has diminished in recent months. Simplify Tail Risk Strategy ETF seeks to provide income and capital appreciation while protecting against significant downside risk to investors by hedging diversified portfolios against severe equity market sell-offs.
Simplify Tail Risk Strategy ETF has amassed $2.6 million in its asset base and charges 1.64% in annual fees from investors. It trades in a volume of 806,000 shares a day on average.
Carbon - KraneShares Global Carbon Offset Strategy ETF ) – Down 90.2%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
KraneShares Global Carbon Offset Strategy ETF has gathered $0.9 million in its asset base and trades in a volume of 17,000 shares a day on average. It charges 79 bps in annual fees.
Volatility - ProShares VIX Short-Term Futures ETF (VIXY - Free Report) ) – Down 72.8%
Volatility products have been lagging this year as they underperform when the stock market surges. ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
ProShares VIX Short-Term Futures ETF has amassed $166.9 million in AUM and charges 85 bps in fees per year. It trades in a volume of 3 million shares per day on average.