After registering the worst first quarter in many years, Wall Street staged a nice comeback through the first half of the second quarter. In fact, the Dow Jones Industrial Average and S&P 500 had their best months since 1987 in April while the Nasdaq saw its best month since June 2000 (read: Leveraged ETFs That More Than Doubled in April).
An unprecedented fiscal and monetary stimulus, progress in the development of a coronavirus vaccine or treatment as well as optimism over the reopening of the economy led to a market rally. Though rounds of economic data point to a slowing down, easing of restrictions in some businesses and parts of U.S. states has started to propel demand and is likely to revive economic growth. The latest data for U.S. consumer sentiment shows that the University of Michigan’s consumer sentiment index rose to 73.7 in early May from 71.8 in April as U.S. fiscal stimulus measures “improved consumers’ finances and widespread price discounting boosted their buying attitudes.”
However, volatility flared up lately on increasing tensions between China and the United States. This is especially true as the Trump administration moved to block semiconductor shipments to Chinese company Huawei. The Commerce Department said it would “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”
In the commodity world, oil prices collapsed to a negative territory for the first time in history on Apr 20 with buyers avoiding delivery of physical crude. The coronavirus pandemic that brought the economy to a standstill lead to an unprecedent fall in oil demand and rise in crude storage. Nevertheless, the oil price rebounded thanks to production cuts by major oil producers and signs of a recovery in demand as some business lockdowns have been lifted globally (read: Oil's Best Streak for First Time Since July: ETF & Stock Winners).
Given this, we have highlighted the best and worst performing zones and their ETFs halfway through the second quarter:
Gold has been on a tear buoyed by investors’ flight to safety. The is especially true against the backdrop of global economic growth concerns triggered by the coronavirus outbreak and the collapse in oil price that have raised the appeal for the yellow metal as a great store of value and hedge against market turmoil. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. As a result, U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU - Free Report) has been the biggest winner to start the second quarter, having risen 65.6%.
This fund provides investors with access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It tracks the U.S. Global Go Gold and Precious Metal Miners Index, holding 29 stocks in its basket. Canada takes the lion’s share at 60.9%, followed by the United States (14.5%) and Australia (12.0%). It has amassed $73.1 million in its asset base and charges 60 bps in fees per year.
Natural gas price has been on a tear thanks to oil price crash and inclement weather. Additionally, improving demand/supply fundamentals also added to the strength. The shutting-in of oil wells (due to low prices) has led to lower natural gas production while the reopening of the economy has started to bring back oil demand. Notably, low oil prices will encourage natural gas use boom in electricity this coming summer. First Trust ISE-Revere Natural Gas Index Fund (FCG - Free Report) has climbed 65.1% at halfway through Q2 (read: 5 Top-Performing ETF Areas of April That Are Up At Least 25%).
This fund offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 34 stocks in its basket. The fund has amassed $82.7 million in its asset base while charging 60 bps in annual fees. Volume is good with 1.1 million shares exchanged per day on average. The product has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.
Lockdown measures across the globe have bolstered online shopping. U.S. e-commerce jumped 49% in April, according to the new data from Adobe’s Digital Economy Index. Groceries led the rally with 110% in daily sales last month, followed by 58% increase in electronic sales. In particular, Amplify Online Retail ETF (IBUY - Free Report) gained nearly 46% in the same time frame. This ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund comprises 46 stocks and has attracted $350.6 million in its asset base. It charges 65 bps in fees per year and trades in average daily volume of 59,000 shares.
Shipping stocks have been hammered as dry bulk freight rates dropped on shrinking demand across all vessel categories. As such, Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) is down 34.7% so far in the second quarter. It provides exposure to the daily price movements of the near-dated dry bulk freight futures. The fund has accumulated about $14.8 million in AUM. It trades in a small volume of about 74,000 shares per day on average and charges a higher annual fee of 1.85% (see: all the Industrial ETFs here).
As these ETFs benefit from a bear market, the rebound in market sentiments led to huge losses in this segment. AdvisorShares Dorsey Wright Short ETF (DWSH - Free Report) shed 22.8% in the same time frame. It is an actively managed ETF that short sells U.S. large-cap securities with the highest relative weakness within an investment universe primarily, comprising large-capitalization U.S.-traded equities. It holds 101 stocks in its basket and charges a higher annual fee of 3.07%. The product trades in moderate average daily volume of 192,000 shares and has accumulated $143.7 million in its asset base.
Volatility products have been losers as these underperform when the stock market booms. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) lost 20.9% at midway Q2. It 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 of VIX futures contracts. This ETN is unpopular and illiquid with AUM of $670.2 million and average daily volume of 44.8 million shares. The note charges 89 bps in annual fees (read: Inverse ETFs Gain on Powell's Economic Warning).
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