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Best & Worst ETFs Halfway Through July

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The month of July started with a bang for the U.S. stock market as the major indices gained more than 2.4% in the last couple of weeks. The dual tailwinds of trade optimism and hopes of easy money policies have been driving the stocks higher.  

The Fed in its congressional testimony signaled rate cut as soon as this month. In his remarks, Powell stated the U.S economy is suffering from a bout of uncertainty caused by trade tensions and slower global growth. He pledged to act as needed to support demand. Per CME Group’s FedWatch tool, market expectations for lower rates in July currently stand at 100%. Lower interest rates will keep borrowing cost down, thereby resulting in higher consumer spending and rise in economic activities. Additionally, recovery in U.S. housing market, rising oil price and the wave of mergers & acquisitions added to the strength.

Notably, the S&P 500 hit the 3,000 milestone and the Dow Jones breached 27,0000 for the first time (read: S&P 500 Breaks Past 3,000: How to Trade With ETFs).

We have highlighted the best and the worst-performing ETFs halfway through the month:

Invesco DWA Technology Momentum ETF PTF

The technology sector has been leading the market rally thanks to a trade truce between the United States and China. Technology stocks have large exposure to the Chinese market. In fact, PTF, which provides exposure to the companies with relative strength (momentum), has been leading the pack. It follows the Dorsey Wright Technology Technical Leaders Index and holds 39 securities in its basket. This ETF is illiquid and relatively unpopular with AUM of $244.4 million and average daily volume of 26,000 shares. It charges 60 bps in annual fees and has gained 6.5% so far this month. The product has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: S&P 500 Hits New High to Start 2H: Top-Ranked ETFs to Buy).

iShares U.S. Healthcare Providers ETF (IHF - Free Report)

This ETF received a boost specifically from Trump’s move to abandon the previously proposed elimination of rebates from government drug plans. IHF follows Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 47 securities in its basket and has amassed $953.7 million in its asset base. Volume is good at about 112,000 shares per day on average. The product charges 43 bps in annual fees and is up 6% in the past couple of weeks. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs to Shine as Trump Tosses Drug Rebate Curb Plan).

Invesco Dynamic Media ETF PBS

Consumer discretionary sector has been riding high ahead of Amazon’s Prime Day, which is now being touted as "Summer's Black Friday" by many analysts. While most ETFs tracking the sector have risen, PBS has gained 5.3%. This fund offers exposure to companies that are principally engaged in the development, production, sale and distribution of goods or services used in the media industry. It tracks the Dynamic Media Intellidex Index and seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria. The approach results in a small basket of 30 stocks with AUM of $77 million in its asset base. The product charges 63 bps in annual fees and trades in average daily volume of 24,000 shares. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: Consumer ETFs Win on Prime Day Becoming "Summer's Black Friday").

Worst ETFs

AdvisorShares Pure Cannabis ETF YOLO

Cannabis stocks have been experiencing downfall amid the new wave of regulation. This is especially true as the Canadian government unveiled new regulations for cannabis products like edibles, beverages and extracts and said that it expects a "limited selection" of those products — with caps on THC — to appear in its weed shops after mid-December of this year. Per the new regulation, marijuana producers have to give the government 60 days' notice of their intent to sell those products. As a result, YOLO, the first actively managed ETF with a dedicated cannabis investment mandate, domiciled in the United States, declined 8.7%.

The fund holds a basket of 33 stocks and has accumulated $56.8 million in its asset base since its debut in April. It charges 74 bps in annual fees and trades in average daily volume of 110,000 shares. The ETF has lost 8.7% in the past couple of weeks (read: Marijuana Stocks & ETFs: What Investors Need to Know).

Global X Copper Miners ETF COPX

Copper price has been on a decline due to stronger dollar despite the trade truce. COPX is the only ETF offering global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 29 stocks in its basket. Canadian firms take the largest share at 26%, while China and Mexico receive a double-digit exposure each. The product has managed $50.3 million in AUM while charging 65 bps in fees per year. It trades in a light volume of 50,000 shares a day on average.

VanEck Vectors Rare Earth/Strategic Metals ETF REMX

The trade talk halted the strong rally in REMX driven by China’s threats to restrict rare-earth exports to the United States in a worsening trade dispute. As a result, the ETFs saw terrible trading, declining 4.1% so far this month. REMX is the only ETF targeting the pure rare earth metal space. It has AUM of $228.2 million and average daily volume of 310,000 shares. It offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. The ETF follows the MVIS Global Rare Earth/Strategic Metals Index, holding 21 stocks in its basket. From a country look, Chinese firms dominate the portfolio with 28% share, closely followed by Australia (23.7%) and the United States (14.4%). The product charges 59 bps in annual fees.

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