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Best & Worst Zones of July & Their ETFs

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The month of July was strong for the U.S. stock market, with all the three major indices logging in the fourth consecutive monthly gains. Notably, Dow Jones recorded the largest monthly gain since January.

This is primarily thanks to strong corporate earnings, accelerating economic growth and reports of renewed trade negotiations between the United States and China. However, escalating trade fears as well as rounds of tech sell-off hurt the rally during the months. Meanwhile, Treasury yields of all three maturities (2, 10 and 30 years) recorded the largest monthly climb since April.

Turning to the commodity side, the Bloomberg Commodity Index, which measures the returns on 25 raw materials, was off 1.5%. Gold has been among the worst performing, declining for the fourth consecutive month and representing the longest stretch of losses since 2013 (read: Gold in Longest 4-Year Losing Streak: Go Short with ETFs).

That said, some corners of ETF investing have performed well while some are lagging. Below, we have highlighted the best and worst zones of July and their ETFs in detail:

Best Zones

Master Limited Partnerships


Master limited partnerships (MLPs) rallied on robust drilling activity, strong earnings, and the new FERC (Federal Energy Regulatory Commission’s) ruling related to the treatment of income taxes for interstate natural gas pipeline operators that has offered them some relaxation. While most of the MLP products surged, ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB - Free Report) led the way higher climbing 12.2%. It is an ETN option and tracks the performance of the Alerian MLP Infrastructure Index, which comprises 22 liquid, midstream energy infrastructure MLPs. The note is extremely illiquid and unpopular with AUM of just $9.6 million and average daily volume of 100 shares. It charges 85 in bps in annual fees (read: 5 Best-Performing Sector ETFs of July).

Shipping

The shipping industry has been on a rise boosted by a boom in dry bulk trade. Crude oil, iron ore and coal are the three major commodities shipped around the world. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) is an actively managed ETF that seeks to provide exposure to daily changes in the price of dry bulk freight futures by tracking the performance of a portfolio consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes that measure rates for shipping dry bulk freight. Since its debut in late March, the fund has accumulated about $3.7 million. It trades in average daily volume of about 6,000 shares and charges a higher annual fee of 1.72%.

Brazil

After a tumultuous ride, emerging market ETFs bounced back strongly in July thanks to cheap valuation and a subdued dollar. In particular, Franklin FTSE Brazil ETF (FLBR - Free Report) , which provides access to the Brazilian stock market, led the way higher having gained 11.5%. The fund follows the FTSE Brazil Capped Index, holding 79 stocks in its basket with double-digit concentration on the top two firms.  It has accumulated $31.7 million in its base since its inception last November and trades in a lower volume of 7.000 shares a day on average. The product charges 19 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: EM ETFs Rebound in July: Value Trap or Value Play?).

Worst Zones

Volatility

Volatility products were terrible performers last month given the accelerating economy and strong earnings optimism that raised the appeal for riskier assets. ProShares VIX Short-Term Futures ETF (VIXY - Free Report) stole the show, declining 16.3% last month. It seeks to profit from increases in the expected volatility of the S&P 500, as measured by the prices of VIX futures contracts. The ETF focuses on 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. It has amassed $132.3 million in AUM and charges 85 bps in fees per year. The fund trades in average daily volume of 2.2 million shares.

Cocoa

After a strong first quarter, cocoa has been on a freefall as abundant flowers on Ivory Coast’s cocoa trees have raised hopes for a strong October-to-March main crop. Notably, Ivory Coast is the world’s largest producer of cocoa beans. iPath Bloomberg Cocoa Subindex Total Return ETN (NIB - Free Report) has lost 13% last month. It follows the Bloomberg Cocoa Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on cocoa. The ETN has been able to manage $132.3 million in AUM and trades in solid volume of 2.2 million shares per day. Expense ratio comes in at 0.70%. The note has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: Commodity ETFs in the Sweet Spot This Year),

Silver

Industrial metals have been hammered by worries that the trade tariff dispute between the United States and China could dent the commodity-hungry economy. Investors should note that China is the top consumer of raw materials and any slowdown in its economy would definitely hurt demand for the metals. ETRACS CMCI Silver Total Return ETN (USV - Free Report) is the worst performer in this category, shedding 11.3%. It is designed to track the performance of the UBS Bloomberg CMCI Silver Total Return, less investor fees. The note is unpopular and illiquid with AUM of just $1.9 million and average daily volume of under 500 shares. It charges 40 bps in annual fees.

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