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Trump Trade Fades: Top and Flop ETFs of Last Week

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Wall Street witnessed the worst weekly performance since election as the euphoria over the President Donald Trump evaporated. Notably, the major benchmarks, namely the S&P 500, the Dow Jones and the Nasdaq shed 1.4%, 1.5% and 1.2%, respectively, last week. Meanwhile, the CBOE Volatility Index climbed 15%, representing the biggest weekly increase since the five days ended December 30. This suggests that investors have started to panic (read: Doubt Over Trump Agenda Put These ETFs in Focus).

Inside Market Woes

Trump failed to secure enough votes to pass the bill for repealing and replacing Obamacare with the American Health Care Act, a major election campaign promise, on Friday. that has forced the President to call off the legislation to overhaul the U.S. healthcare system. Though the failure to clear the passage may not result in a real tantrum, it faded investors’ confidence in Trump’s ability to deliver on tax cuts, deregulation and infrastructure spending that could boost the economy.

This has unnerved investors, especially those who had bid for the stocks in anticipation of Trump’s business-friendly and pro-growth policies, leading to risk-off trading. In fact, most of the analysts see continued weakness in stock markets at least in the short term. As per WSJ, some analysts expect a 10% pullback from March 1 highs for the indices (read: 7 ETFs Offering 20% Plus Returns Since Election).

Further, the stocks seem overvalued with the companies on the S&P 500 trading at an average of 21.5 times their past 12 months of earnings, well ahead of the 10-year average of 16.5 times according to FactSet. The latest survey from Bank of America Merrill Lynch reveals that about 34% of the respondents believe that U.S. equities are overvalued, and are at the highest level in the history of the survey that goes back 17 years. Additionally, 81% believe the U.S. is the most expensive region compared with the other parts of the world.  

Given this, several ETFs saw a spike in the week while some were laggards. Below, we have highlighted some of them:

Top ETFs

iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report)

Volatility products have been the major gainers last week with VXX adding 6.1%. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts. The note has amassed $1.1 billion in AUM and charges 89 bps in fees per year.

The Organics ETF

This ETF offers exposure to global companies that can capitalize on our increasing desire for naturally derived food and personal care items, including companies which service, produce, distribute, market or sell organic food, beverage, cosmetics, supplements, or packaging. It follows the Solactive Organics Index, holding 27 stocks in its basket with heavy concentration on the top two firms. American firms dominate the returns with 64% of the portfolio while Europe and Asia Pacific ex-Japan round off the top three with double-digit exposure each. The fund charges 50 bps in annual fees and has accumulated just $2.5 million in its asset base since its debut in June 2016. It gained 3.8% last week (read: Lower Risk in Your Portfolio with These ETFs).

John Hancock Multifactor Utilities ETF

This fund focuses on the time-tested multifactor approach that emphasizes factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected return in the utilities sector. It follows the John Hancock Dimensional Utilities Index, holding 44 stocks with none accounting for more than 5.19% share. The fund has amassed $16.2 million in AUM while charging 50 bps in fees per year. JHMT was up 3.2% last week but has a Zacks ETF Rank of 4 or ‘Sell’ rating.

PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ - Free Report)

This ETF targets the high end of the yield curve. It tracks the BofA Merrill Lynch Long Treasury Principal STRIPS Index and holds 20 securities in its basket. Both effective maturity and effective duration of the fund are 27.22 years. This fund has AUM of $218.7 million and average daily volume of 47,000 shares a day. It charges 15 bps in annual fees and added nearly 3% last week. ZROZ has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating (read: March Rate Hike in the Cards: Bet on These Inverse Treasury ETFs).

Flop ETFs

Global X Uranium ETF (URA - Free Report)

This ETF provides pure play to a broad range of uranium mining companies by tracking the Solactive Global Uranium Total Return Index. Holding 23 stocks in its basket, it is highly concentrated on the top two firms with a combined 32.5% share while other firms hold less than 6.7% share each. The ETF has amassed $320.2 million in its asset base and charges 70 bps in annual fees. It shed 7.8% last week.

PowerShares KBW Regional Banking Portfolio (KBWR - Free Report)

This fund targets the banking corner of the financial sector and follows the KBW Nasdaq Regional Banking Index. Holding 50 stocks in its basket, it is widely diversified with none holding more than 4.05% share. It has AUM of $236.8 million and charges 35 bps in fees per year from investors. KBWR lost 6.6% last week and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating (read: Should You Buy Bank ETFs on the Dip?).

VanEck Vectors Steel ETF (SLX - Free Report)

This fund targets the steel sector providing exposure to a small basket of 27 stocks by tracking tracks the NYSE Arca Steel Index. It is heavily concentrated on the top two firms, which account for 28% share while the other firms hold less than 7.2% of assets. American firms dominate the fund’s returns at 34.2%, followed by Brazil (25.1%), and United Kingdom (13.5%). The ETF has amassed $101.5 million in its asset base and charges 55 bps in fees from investors. It lost 6.5% last week.

First Trust NASDAQ ABA Community Bank Index Fund (QABA - Free Report)

This ETF offers exposure to banks and thrifts, and tracks the NASDAQ OMX ABA Community Bank Index, holding 160 stocks in its basket. It is well spread out across various components as none accounts for more than 3.22% of assets. The fund has accumulated $445.6 million in its asset base and charges 60 bps in annual fees. It shed 6.4% in the past week and has a Zacks ETF Rank of 1 (read: 6 Solid Reasons to Buy Financial ETFs Now).

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