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The start of 2017 has been solid with both the S&P 500 and the Nasdaq hitting fresh highs in the first week. However, the rally fizzled out after lack of clarity on Trump’s policies in his first press conference that dampened investors’ mood. Additionally, fresh concerns over Brexit, fears of a trade war and geopolitical tensions are weighing on the stock market.
Skepticism over Trump’s ability to keep his promises is looming large in the market ahead of his inauguration on January 20. Most analysts have warned of a higher level of volatility in the coming months after Trump takes office (read: Time to Prepare for 'Trump Slump' with These ETFs?).
Nevertheless, expectation of corporate earnings growth, solid Chinese data, stabilization in oil price, an accelerating job market, a pickup in inflation and increasing consumer confidence will push the stocks higher. As a result, the S&P 500 and the Nasdaq were up nearly 1.6% and 3.5%, respectively, in the first two weeks while the Dow Jones gained just 0.6%.
Meanwhile, government bonds and precious metals have also gained immense traction on investors’ flight to safety and commodities continued their stellar performance thanks to improving global trends. That being said, we highlighted some ETFs that have performed better and some that have given terrible performances to start the year.
Top Performers
Uranium ETFs
Uranium climbed the most at the start of 2017 due to shrinking supply. Kazakhstan, which accounts for 12% of the world's uranium resources and is the world's largest uranium producer since 2009, plans to cut its production by 10% this year. This has push uranium prices higher. Additionally, rise in oil price and increased demand for nuclear power added to the strength.
Given this, the pure play Global X Uranium ETF (URA - Free Report) surged 31.6% in the first two weeks. The fund tracks the Solactive Global Uranium Total Return Index, holding 23 stocks in its basket. It is highly concentrated on the top two firms with a combined 34.7% share while other firms hold less than 6.4% share each. The ETF has amassed $126 million in its asset base and charges 70 bps in annual fees (read: What's Behind the Surge in Uranium ETF?).
Mining ETFs
Mining stocks are continuing with their winning trend this year too buoyed by rising commodity prices, positive developments in China, a pickup in global manufacturing activities and improving global trends. Notably, about half of the global consumption of the industrial commodities comes from China. Further, Trump is acting as a wild card for the industrial metals given his promise to revive U.S. manufacturing and spend big time on infrastructure by rebuilding highways, bridges and hospitals among others. While many mining ETFs have been on a tear, PureFunds ISE Junior Silver ETF (SILJ - Free Report) again topped the list of the best performing ETFs to start 2017, gaining 18%.
This product provides a true small cap play on the silver mining space by tracking the ISE Junior Silver (Small Cap Miners/Explorers) Index. Holding 24 stocks in its basket, the fund is heavily concentrated on the top three firms that collectively make up for 40.6% of assets while other firms hold less than 5.2% share. Canadian firms take the lion’s share at 81%, while the U.S. and Peru take the reminder. The fund has managed assets worth $49.4 million and charges 69 bps in annual fees (read: 6 Top Performing Stocks of the Best ETF of 2016).
Soft Commodity ETFs
Prices of soft commodities jumped on supply concerns, pushing iPath Pure Beta Softs ETN higher by 16.8%. This note tracks the Barclays Commodity Index Softs Pure Beta TR, which reflects the returns available through an unleveraged investment in three futures contracts on soft commodities traded on U.S. exchanges. Sugar futures contracts make up for 48.3% while futures contracts on coffee and cotton account for 33.4% and 18.2%, respectively. The ETN has been able to manage $0.6 million and has an expense ratio of 0.75%.
Worst Performers
Carbon Credit ETFs
The only product in the space – iPath Global Carbon ETN (GRN - Free Report) – lost 21% in the first two weeks of 2017. This is especially thanks to Brexit that has created uncertainty in European carbon-credit trading. In addition, lack of enthusiasm in countries like Australia to come up with carbon-trading frameworks is weighing on investment decisions.
The ETN follows the Barclays Global Carbon Index Total Return, which measures the performance of the most highly traded carbon-related credit plans. The note holds around 99.95% of its total assets in futures contracts of ECX Allowances (EUA) Emission and the remaining in futures contracts of ECX Certified Emission Reductions (CERs). The ETN has total assets of $1.1 million while charges investors 75 bps in fees and expenses.
Natural Gas ETFs
Natural gas was the biggest laggard to start the year as price slumped to 10.7% in a single trading day on January 3, marking the worst day in nearly three years, and entered into a bear territory on January 9 on a warmer weather forecast. A mild winter in the U.S. has dented heating demand for natural gas. As a result, the ETFs tracking the natural gas futures have been hit, withiPath Bloomberg Natural Gas Subindex Total Return ETN shedding 17.6% (read: 4 ETF Areas Likely to Stay Strong Entering 2017).
The note 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 $5.8 million and charges 75 bps annually.
Volatility ETFs
Though lack of clarity on a raft of policy proposals during Trump’s first press conference resulted in some volatility last week, good tidings continued to fuel confidence in the market. Volatility products have been the major losers, as these tend to underperform when markets are rising or fear levels over the future are low.
While most of the volatility products saw worst trading to start the year, iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) lost 15.9%. This ETN follows the S&P 500 VIX Short-Term Futures Index, which reflects the latent 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 month VIX futures contracts. The note has amassed more than $1 billion in AUM and charges 89 bps in annual fees and expenses.
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Best and Worst ETFs to Start 2017
The start of 2017 has been solid with both the S&P 500 and the Nasdaq hitting fresh highs in the first week. However, the rally fizzled out after lack of clarity on Trump’s policies in his first press conference that dampened investors’ mood. Additionally, fresh concerns over Brexit, fears of a trade war and geopolitical tensions are weighing on the stock market.
Skepticism over Trump’s ability to keep his promises is looming large in the market ahead of his inauguration on January 20. Most analysts have warned of a higher level of volatility in the coming months after Trump takes office (read: Time to Prepare for 'Trump Slump' with These ETFs?).
Nevertheless, expectation of corporate earnings growth, solid Chinese data, stabilization in oil price, an accelerating job market, a pickup in inflation and increasing consumer confidence will push the stocks higher. As a result, the S&P 500 and the Nasdaq were up nearly 1.6% and 3.5%, respectively, in the first two weeks while the Dow Jones gained just 0.6%.
Meanwhile, government bonds and precious metals have also gained immense traction on investors’ flight to safety and commodities continued their stellar performance thanks to improving global trends. That being said, we highlighted some ETFs that have performed better and some that have given terrible performances to start the year.
Top Performers
Uranium ETFs
Uranium climbed the most at the start of 2017 due to shrinking supply. Kazakhstan, which accounts for 12% of the world's uranium resources and is the world's largest uranium producer since 2009, plans to cut its production by 10% this year. This has push uranium prices higher. Additionally, rise in oil price and increased demand for nuclear power added to the strength.
Given this, the pure play Global X Uranium ETF (URA - Free Report) surged 31.6% in the first two weeks. The fund tracks the Solactive Global Uranium Total Return Index, holding 23 stocks in its basket. It is highly concentrated on the top two firms with a combined 34.7% share while other firms hold less than 6.4% share each. The ETF has amassed $126 million in its asset base and charges 70 bps in annual fees (read: What's Behind the Surge in Uranium ETF?).
Mining ETFs
Mining stocks are continuing with their winning trend this year too buoyed by rising commodity prices, positive developments in China, a pickup in global manufacturing activities and improving global trends. Notably, about half of the global consumption of the industrial commodities comes from China. Further, Trump is acting as a wild card for the industrial metals given his promise to revive U.S. manufacturing and spend big time on infrastructure by rebuilding highways, bridges and hospitals among others. While many mining ETFs have been on a tear, PureFunds ISE Junior Silver ETF (SILJ - Free Report) again topped the list of the best performing ETFs to start 2017, gaining 18%.
This product provides a true small cap play on the silver mining space by tracking the ISE Junior Silver (Small Cap Miners/Explorers) Index. Holding 24 stocks in its basket, the fund is heavily concentrated on the top three firms that collectively make up for 40.6% of assets while other firms hold less than 5.2% share. Canadian firms take the lion’s share at 81%, while the U.S. and Peru take the reminder. The fund has managed assets worth $49.4 million and charges 69 bps in annual fees (read: 6 Top Performing Stocks of the Best ETF of 2016).
Soft Commodity ETFs
Prices of soft commodities jumped on supply concerns, pushing iPath Pure Beta Softs ETN higher by 16.8%. This note tracks the Barclays Commodity Index Softs Pure Beta TR, which reflects the returns available through an unleveraged investment in three futures contracts on soft commodities traded on U.S. exchanges. Sugar futures contracts make up for 48.3% while futures contracts on coffee and cotton account for 33.4% and 18.2%, respectively. The ETN has been able to manage $0.6 million and has an expense ratio of 0.75%.
Worst Performers
Carbon Credit ETFs
The only product in the space – iPath Global Carbon ETN (GRN - Free Report) – lost 21% in the first two weeks of 2017. This is especially thanks to Brexit that has created uncertainty in European carbon-credit trading. In addition, lack of enthusiasm in countries like Australia to come up with carbon-trading frameworks is weighing on investment decisions.
The ETN follows the Barclays Global Carbon Index Total Return, which measures the performance of the most highly traded carbon-related credit plans. The note holds around 99.95% of its total assets in futures contracts of ECX Allowances (EUA) Emission and the remaining in futures contracts of ECX Certified Emission Reductions (CERs). The ETN has total assets of $1.1 million while charges investors 75 bps in fees and expenses.
Natural Gas ETFs
Natural gas was the biggest laggard to start the year as price slumped to 10.7% in a single trading day on January 3, marking the worst day in nearly three years, and entered into a bear territory on January 9 on a warmer weather forecast. A mild winter in the U.S. has dented heating demand for natural gas. As a result, the ETFs tracking the natural gas futures have been hit, withiPath Bloomberg Natural Gas Subindex Total Return ETN shedding 17.6% (read: 4 ETF Areas Likely to Stay Strong Entering 2017).
The note 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 $5.8 million and charges 75 bps annually.
Volatility ETFs
Though lack of clarity on a raft of policy proposals during Trump’s first press conference resulted in some volatility last week, good tidings continued to fuel confidence in the market. Volatility products have been the major losers, as these tend to underperform when markets are rising or fear levels over the future are low.
While most of the volatility products saw worst trading to start the year, iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) lost 15.9%. This ETN follows the S&P 500 VIX Short-Term Futures Index, which reflects the latent 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 month VIX futures contracts. The note has amassed more than $1 billion in AUM and charges 89 bps in annual fees and expenses.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>