The fourth quarter normally remains favorable for investors as loads of merry-making events are lined up. “Over the past three decades back to 1989, the Dow (4.3%), S&P (3.6%) and Nasdaq (4.7%) all show gains in the fourth quarter, according to Kensho, and trade positive 75%-80% of the time,” per CNBC.

This year too is no different with SPY, DIA and QQQ returning about 8.8%, 6.5% and 12.5%, respectively, so far. U.S.-China trade deal optimism and global policy easing were the major market tailwinds. Against this backdrop, below we highlight a few best-and worst performing ETFs of the fourth quarter.

Best ETFs

Virtus LifeSci Biotech Clinical Trials ETF (BBC Quick QuoteBBC - Free Report) – Up 66.5%

Favorable financials and valuations, a wave of mergers and acquisitions and the release of upbeat drug data have been propelling the biotech sector higher. Plenty of biotech ETFs have surged in the quarter with BBC topping the list. (read: Biotech Leading in Q4: Best ETFs & Stocks). 

Global X MSCI Pakistan ETF – Up 25.8%

The Pakistan Stock Exchange has been riding high of late. “Positive economic indicators, possible monetary easing and a thaw in border tensions with India” are probably driving the rally. Financial markets are expected to be more regulated as Pakistan intends to start a circuit breaker at the beginning of next year to soothe sudden swings in the equity index. The stock exchange is also upgrading its trading platform and launching new products to boost liquidity, per Blomberg. Pakistan has successfully cleared the first quarterly review with the IMF, important for the disbursement of the Extended Fund Facility worth $6 billion.

iPath Series B Bloomberg Coffee Subindex Total Return ETN – Up 25.2%

Coffee futures touched around a two-year high thanks to concerns over a drought developing in Brazil — a key coffee producer in the world. Also, a decline in Brazilian currency  (due to emerging market weakness, a host of interest rate cuts and disappointing results from a much-hyped oil auction at the start of November) boosted the prices of the commodity. Commodities are often priced in the U.S. dollar, so a decline in the exchange rate means higher prices in terms of local currency (read: Top & Flop ETFs of November).

Global X MSCI China Real Estate ETF – Up 22.4%

China has been witnessing a red hot real-estate market with property prices surging in big cities. In any case, Chinese shares have been benefiting in recent trading on trade deal hopes. Affordable home loans are an added positive.

Worst ETFs

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX Quick QuoteVXX - Free Report) – Down 37.1%

The key U.S. indexes have rallied in the fourth quarter to hit record highs on cues of a partial trade between the United States and China. Receding fears of global growth slowdown and the USMCA deal added to the strength. All these factors lowered volatility in the market (read: Bull Market Rages On: Bet Big for 2020 With These ETFs).

Global X Cannabis ETF – Down 28.9%

Third-quarter results of marijuana companies failed to impress investors. Guidance issued by the companies was also underwhelming Also, CannTrust faced regulatory issues for illicit cultivation in 2019. Deals activity — one of the hot features of the industry in 2018 — also declined. A source said that the number of cannabis M&A deals in the four weeks ended Nov 22 dropped to three from 36 a year ago. All these factors weighed on the space (read: What's Ahead for Marijuana ETFs After a Dismal Show in 2019?).

Invesco India ETF (PIN Quick QuotePIN - Free Report) – Down 17.9%

Indian stocks have been losing in the fourth quarter due to the loss of prime minister Modi-led Bharatiya Jaanta Party (BJP) in some key state elections. Most recently, the party lost control of “the mineral-rich eastern state of Jharkhand.” With Jharkhand’s loss, BJP's control in the Indian map squeezes to half from the 2017 peak.

iPath Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN – Down 17.3%

Natural gas prices have been suffering from higher inventory. The U.S. Energy Information Administration reported that total natural gas inventory now stands at 3.411 trillion cubic feet for the week ended Dec 13, up 22.1% from the year-ago level and down a negligible 0.3% compared with the five-year average.

Solid storage and chances of a less inclement weather in the medium term are not likely to support natural gas prices. Basically, supply of the natural gas fuel has surpassed demand.

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