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Best & Worst Zones of This Year and Their ETFs

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The stock market bulls have been marching ahead this year on trade optimism and cheap money flows. Notably, lower interest rates make borrowing cheaper, providing a boost to both investment in new projects and repayment of higher-rate debt. Consequently, it leads to strong economic growth and is thus a boon to the stock market.

The steadily growing U.S. economy as indicated by the slew of upbeat data of late has rekindled investors’ interest into riskier assets. An increase in inflation, higher consumer and business confidence, retail sales as well as increase in manufacturing activity underscore the strength of the economy. However, lingering trade woes, recession fears, geopolitical tension and Brexit issues continue to weigh on the stocks (read: Top-Performing ETFs of the First Nine Months of 2019).

Meanwhile, the steep decline in yields has led to the bonds rally. On the commodity side, demand for safe haven pushed prices for precious metals upward and deal hopes coupled with China stimulus drove industrial metals higher.   

Given this, most corners of ETF investing have performed exceptionally well while a few areas are lagging. Below, we have highlighted the best and worst zones so far this year and their ETFs in detail:

Best Zones

Currency


The overlooked Market Vectors-Indian Rupee/USD ETN (INR - Free Report) has emerged as the biggest winner, skyrocketing more than 110% this year. The surge came as it is structured as an exchange traded note (ETN), which is currently trading almost 110% above its net asset value. The product tracks the performance of the S&P Indian Rupee Total Return Index and has accumulated $1 million in its asset base. The ETN charges 55 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Why The Indian Rupee ETN Has Soared Over 125% in 2019).
 
Solar

Invesco Solar ETF (TAN - Free Report) , which offers global exposure to 22 solar stocks, has been on a tear given strong solar installation, a rebound in global solar demand, California’s push to make solar panels and competitive pricing. American firms dominate the fund’s portfolio with nearly 47.7% share, followed by China (25.9%) and Germany (7.4%). The product has amassed $464.4 million in its asset base and trades in average daily volume of 219,000 shares. It charges investors 70 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook (read: Top-Performing ETFs of the First Nine Months of 2019).

Nickel

Nickel prices have been on a tear this year on supply constraints. As such, iPath Bloomberg Nickel Subindex Total Return ETN (JJN - Free Report) climbed about 63.7%. The note tracks the Bloomberg Nickel Subindex Total Return, which provides returns through one futures contract on nickel. The product is unpopular and illiquid with AUM of just $8.8 million and average daily volume of around 1,000 shares. Expense ratio came in at 0.75%. JJN has a Zacks ETF Rank #3 with a High risk outlook (read: Nickel ETF Soars: What's the Driving Force?).

Homebuilder

The decline in mortgage rates and slower home price growth has been fueling growth in the homebuilding segment. iShares U.S. Home Construction ETF (ITB - Free Report) provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.3 billion, it holds a basket of 45 stocks. The product charges 42 bps in annual fees and trades in heavy volume of around 2.2 million shares a day on average. It has gained 43.6% so far this year and has a Zacks ETF Rank #3 with a High risk outlook (read: Here's Why Homebuilding ETFs Are Soaring).

Worst Zones

Volatility


Though the stock market witnessed bouts of volatility in the first nine months, volatility products were the biggest losers. In particular, VelocityShares Daily Long VIX Short-Term ETN (VIIX - Free Report) has dropped 49.4%. It seeks to deliver the daily performance of the S&P 500 VIX Short-Term Futures Index, which provides investors with exposure to one or more maturities of futures contracts on the VIX, which reflects implied volatility of the S&P 500 Index at various points along the volatility forward curve. This ETN is unpopular and illiquid with AUM of $23.1 million and average daily volume of 101,000 shares. The note charges 89 bps in annual fees (read: How to Play Market Volatility With ETFs).

FAANG

FAANG and other big tech stocks have been hit badly from the escalation in tit-for-tat trade tariff and recessionary fears. Notably, AdvisorShares New Tech and Media ETF has plunged 32.7% in the year-to-date timeframe. This is an actively managed ETF designed to invest in companies that are driving economic growth in the modern era, and can adapt to changing leadership by maintaining the ability to invest in the next generation of technology and media companies leading the equity markets. It seeks to provide a similar return stream to the performance of technology and media equity leaders as characterized by the FANG acronym. This approach results in a basket of 25 stocks and has accumulated $10.6 million in its asset base. It trades in average daily volume of 10,000 shares and comes with an expense ratio of 1.86%.

Pakistan

Pakistan-based stocks are the worst performing this year amid tensions between India and Pakistan on the disputed Kashmir region. Global X MSCI Pakistan ETF (PAK - Free Report) has lost 23.2%. It provides investors access to the 33 largest, most-liquid companies in Pakistan by tracking the MSCI All Pakistan Select 25/50 Index. It has a lower level of $37.1 million in AUM and charges 87 bps in fees and expenses. Additionally, it trades in lower volumes of about 49,000 shares and has a Zacks ETF Rank of #4 (Sell) with a Medium risk outlook.

Natural Gas

Though the commodity has bounced back this month, natural gas price was on a downtrend on a supply glut. iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ - Free Report) delivers returns through an unleveraged investment in the natural gas futures contract plus the rate of interest on specified T-Bills. It follows the Bloomberg Natural Gas Subindex Total Return Index. The product is unpopular and illiquid with AUM of $3.9 million and average daily volume of 1,000 shares. Expense ratio comes in at 0.45%. GAZ is down 21.4% in the year-to-date timeframe (read: Natural Gas ETFs on a Tear: Here's Why).

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