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January proved to be a month of fluctuation for Wall Street. While concerns about overvalued stocks and reduced expectations for rate cuts had an adverse impact, the stock market saw a rally thanks to strong corporate earnings, advancements in artificial intelligence, and renewed confidence in the tech sector. Despite the volatility, all three major benchmarks ended the month on a positive note.
The S&P 500 has gained 4.5% past month, the Dow Jones inched up 2.8% and the Nasdaq Composite advanced 5.8% past month (as of Feb 1, 2024). The S&P 500 hit a record high, topping the 4,900-milestone due to a resurgence in the tech sector and upbeat economic data.
The Federal Reserve's preferred inflation indicator, the personal consumption expenditure index, rose 2.6% in December. Notably, this marked the third successive time that inflation remained below 3%. Additionally, the economic growth surpassed expectations, with GDP growing at an annualized rate of 3.3% in the fourth quarter of 2023, beating the Wall Street consensus estimate of 2%.
Furthermore, the U.S. government introduced a pilot program for AI research, collaborating with major tech companies and federal agencies under the National Science Foundation. This initiative likely contributed to the positive sentiment in the tech sector.
At the end of the month, on the monetary policy front, the Fed, during its latest meeting, decided to maintain interest rates within the range of 5.25% to 5.50%, the highest level since 2001. The Fed Chair Jerome Powell's indicated that rate cuts are unlikely in the near future, particularly in March. The Fed seek more evidence of declining inflation before any rate cuts are considered (read: Time for Value ETFs as March Rate Cut Unlikely?).
Against this backdrop, below we highlight the top and flop ETF areas of January.
Best ETF Areas
Marijuana
Amplify U.S. Alternative Harvest ETF (MJUS - Free Report) – Up 44.6%
The cannabis industry has been performing well this year after the US Drug Enforcement Administration (“DEA”) started reviewing the potential reclassification of cannabis from Schedule I to Schedule III. Many ETFs in the space have been surging (read: Cannabis ETFs Outperform in January).
Energy
KraneShares Global Carbon Offset Strategy ETF – Up 36.2%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
Investors should note that there is a substantial emphasis on decarbonization, with goals for zero-emission aircraft and sustainable aviation fuel technologies. Consumers increasingly prioritize sustainable activities and investments, which is why KSET has been gaining prominence.
The uranium market has been red-hot this year, with price spiking to a new 16-year high on a buying frenzy triggered after Kazatomprom, the world’s largest producer of the radioactive material, warned on supply shortfalls. Renewed interest in nuclear power also added to the strength. Notably, 22 countries, including the United States, UK, Canada and France, have committed to tripling their nuclear capacity by 2050.
Worst ETF Areas
Total Portfolio
Simplify Tail Risk Strategy ETF – Down 59.6%
The Simplify Tail Risk Strategy ETF looks to provide income and capital appreciation while protecting against significant downside risk to investors with a standalone solution for hedging diversified portfolios against severe equity market selloffs. This low-risk ETF underperformed as the month of January witnessed a moderately upbeat Wall Street.
Electric Vehicle
Defiance Pure Electric Vehicle ETF – Down 31.9%
In late-January, Tesla (TSLA - Free Report) , the electric vehicle (EV) manufacturer, released its Q4 earnings, which missed estimates and led to a decline in its stock price. The company also provided a pessimistic outlook for full-year production in 2024. China EV startup Li Auto (LI - Free Report) was hurt by worries about increased competition. Many of the EV startups aren't manufacturing electric vehicles yet.
Bitcoin price dropped 5% past month. January witnessed the approval from the SEC for a host of spot Bitcoin ETFs. This was one of the most widely anticipated events in the history of cryptocurrency. Some viewed it as a “Sell the news” event as speculators pushed prices up ahead of the news.
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Best & Worst ETFs of January
January proved to be a month of fluctuation for Wall Street. While concerns about overvalued stocks and reduced expectations for rate cuts had an adverse impact, the stock market saw a rally thanks to strong corporate earnings, advancements in artificial intelligence, and renewed confidence in the tech sector. Despite the volatility, all three major benchmarks ended the month on a positive note.
The S&P 500 has gained 4.5% past month, the Dow Jones inched up 2.8% and the Nasdaq Composite advanced 5.8% past month (as of Feb 1, 2024). The S&P 500 hit a record high, topping the 4,900-milestone due to a resurgence in the tech sector and upbeat economic data.
The Federal Reserve's preferred inflation indicator, the personal consumption expenditure index, rose 2.6% in December. Notably, this marked the third successive time that inflation remained below 3%. Additionally, the economic growth surpassed expectations, with GDP growing at an annualized rate of 3.3% in the fourth quarter of 2023, beating the Wall Street consensus estimate of 2%.
Furthermore, the U.S. government introduced a pilot program for AI research, collaborating with major tech companies and federal agencies under the National Science Foundation. This initiative likely contributed to the positive sentiment in the tech sector.
At the end of the month, on the monetary policy front, the Fed, during its latest meeting, decided to maintain interest rates within the range of 5.25% to 5.50%, the highest level since 2001. The Fed Chair Jerome Powell's indicated that rate cuts are unlikely in the near future, particularly in March. The Fed seek more evidence of declining inflation before any rate cuts are considered (read: Time for Value ETFs as March Rate Cut Unlikely?).
Against this backdrop, below we highlight the top and flop ETF areas of January.
Best ETF Areas
Marijuana
Amplify U.S. Alternative Harvest ETF (MJUS - Free Report) – Up 44.6%
Roundhill Cannabis ETF (WEED - Free Report) – Up 43.8%
The cannabis industry has been performing well this year after the US Drug Enforcement Administration (“DEA”) started reviewing the potential reclassification of cannabis from Schedule I to Schedule III. Many ETFs in the space have been surging (read: Cannabis ETFs Outperform in January).
Energy
KraneShares Global Carbon Offset Strategy ETF – Up 36.2%
KraneShares Global Carbon Offset Strategy ETF provides investors access to global carbon offset futures contracts, previously unavailable through an ETF. It tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index, which provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include Nature-Based Global Emission Offsets (N-GEOs) and Global Emission Offsets (GEOs), which trade through the CME Group, the world's largest financial derivatives exchange.
Investors should note that there is a substantial emphasis on decarbonization, with goals for zero-emission aircraft and sustainable aviation fuel technologies. Consumers increasingly prioritize sustainable activities and investments, which is why KSET has been gaining prominence.
Materials
Sprott Junior Uranium Miners ETF (URNJ - Free Report) – Up 26.6%
Sprott Uranium Miners ETF (URNM - Free Report) – Up 21.1%
The uranium market has been red-hot this year, with price spiking to a new 16-year high on a buying frenzy triggered after Kazatomprom, the world’s largest producer of the radioactive material, warned on supply shortfalls. Renewed interest in nuclear power also added to the strength. Notably, 22 countries, including the United States, UK, Canada and France, have committed to tripling their nuclear capacity by 2050.
Worst ETF Areas
Total Portfolio
Simplify Tail Risk Strategy ETF – Down 59.6%
The Simplify Tail Risk Strategy ETF looks to provide income and capital appreciation while protecting against significant downside risk to investors with a standalone solution for hedging diversified portfolios against severe equity market selloffs. This low-risk ETF underperformed as the month of January witnessed a moderately upbeat Wall Street.
Electric Vehicle
Defiance Pure Electric Vehicle ETF – Down 31.9%
In late-January, Tesla (TSLA - Free Report) , the electric vehicle (EV) manufacturer, released its Q4 earnings, which missed estimates and led to a decline in its stock price. The company also provided a pessimistic outlook for full-year production in 2024. China EV startup Li Auto (LI - Free Report) was hurt by worries about increased competition. Many of the EV startups aren't manufacturing electric vehicles yet.
Cryptocurrency ETFs
Valkyrie Bitcoin Miners ETF (WGMI - Free Report) – Down 26.8%
Bitcoin price dropped 5% past month. January witnessed the approval from the SEC for a host of spot Bitcoin ETFs. This was one of the most widely anticipated events in the history of cryptocurrency. Some viewed it as a “Sell the news” event as speculators pushed prices up ahead of the news.