The Wall Street suffered one of its worst weeks since the financial crisis with all the three major indices declining more than 5% each, marking their worst loss in more than two years. Meanwhile, the CBOE Volatility Index (VIX), also known as the fear gauge, hit the highest level in a year.
After dropping more than 3% on Feb 5 and Feb 8, the Dow and S&P 500 fell into a correction territory (a decline of more than 10% from their last peak reached in late January) but rebounded from that level on Feb 9. At the lower levels, the S&P 500 shed about $2.5 trillion in its value from Jan 26 and nearly half of its sectors are down more than 10% (read: Market in Correction: These ETFs & Stocks Still Offer Value).
The sharp selloff came on the heels of a better-than-expected jobs report that has ignited inflation fears and the resultant expectation for faster-than-expected rate hikes. This has led to a sharp rise in bond yields, making the equities unattractive. Further, a pick-up in economic growth across many developed and developing countries pushed up chances of an end to the cheap monetary policy era outside United States. All these are weighing heavily on the bull market, which is drawing closer to its ninth anniversary.
The rout has spread to the stock market across the globe. This is especially true as the FTSE All-World tumbled 6.2% last week, which was among the worst weekly performances since September 2011. This has wiped out more than $5 trillion in value from the global stock market, according to S&P Dow Jones Indices.
However, the bullish sentiment for stocks remains intact given accelerating global economic growth, euphoria surrounding the new tax legislation and strong corporate earnings. Growth in the U.S. economy has been solid, buoyed by an impressive labor market, higher wages, increasing consumer spending and high consumer confidence (read: Low Beta ETFs to Buy as Bulls Play Hide & Seek).
Against such a volatile backdrop, a few ETFs saw a huge spike in the week while several were laggards. Below, we have highlighted some of them:
Rex Volmaxx Long Vix Weekly Futures Strategy ETF
Given the heightened volatility and bull-bear tug-of-war throughout the week, VMAX was the largest winner having climbed 72.3% last week. The ETF provides long exposure to the VIX Index by holding a combination of VIX futures contracts that are near expiration. It has amassed $6.4 million in AUM and charges 2.90% in fees per year. It sees a meager volume of about 10,000 shares a day (read: Volatility ETFs Advance On Rising Yields).
PowerShares DB G10 Currency Harvest Fund (DBV - Free Report)
This ETF seeks to track changes, whether positive or negative, in the level of the Deutsche Bank G10 Currency Future Harvest Index – Excess Return plus the interest income from the fund's holdings of primarily U.S. Treasury securities and money market income less the expenses. The index is composed of currency futures contracts on certain G10 currencies and is designed to exploit the trend that currencies associated with relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. DBV has $28 million in AUM and trades in a smaller volume of nearly 10,000 shares. It charges 80 bps in annual fees and gained 4.4% last week.
PowerShares S&P 500 Downside Hedged Portfolio (PHDG - Free Report)
This actively managed fund seeks to deliver positive returns in rising or falling markets that are uncorrelated to broad equity or fixed-income market returns. It tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The S&P 500 Total Return Index represents the equity component while the S&P 500 VIX Short-Term Futures Index represents the volatility component of the index. The non-equity (volatility + cash) portion makes up for one-fourth of the portfolio while the rest goes to equity. The fund has accumulated $23.7 million in its asset base and charges 39 bps in fees per year from investors. Volume is light, exchanging 4,000 shares a day on average. The ETF was up 4.4% last week (read: How to Hedge Volatility With ETFs).
VelocityShares VIX Variable Long/Short ETN
The ETN is linked to the total return version of the S&P 500 VIX Futures Variable Long/Short Index TR Short Term, which represents strategies that potentially achieve positive returns from the negative carry in VIX futures, while providing a hedge against a large spike in VIX futures. The product has just $20.5 million in AUM and sees a paltry average daily volume of 7,000 shares. It shed 36.7% last week.
Global X China Materials ETF (CHIM - Free Report)
This fund targets China’s material sector and tracks the Solactive China Materials Total Return Index. Holding 35 stocks in its basket, the fund is moderately concentrated on the top firms with none holding more than 7.5% share. It charges 65 bps in annual fees and trades in light volume of about 5,000 shares a day on average. The fund is unpopular with AUM of $5.1 million and was down 15.1% last week (see: all the Materials ETFs here).
SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report)
With AUM of $357.7 million, this fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 38 securities in its basket with none holding more than 3.9% share and charges 35 bps in annual fees. The fund trades in a good average daily volume of 692,000 shares and lost 12.4% last week.
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