Despite last year’s headwinds, especially U.S.-China trade woes and slower global growth that have spilled over into this year, and the longest government shutdown in history, Wall Street has started the New Year on a solid note.
Robust December jobs data and Powell’s comment that the Fed is not in a hurry to raise rates this year instilled optimism in the market. Signs of progress in U.S.-China trade talks have also boosted demand for riskier assets. Additionally, Fed minutes, which indicated caution on future interest rate hikes, have helped to boost sentiment (read: Dovish Fed Minutes Should Boost These ETFs).
In fact, U.S. stocks registered the third straight week of gains, with the S&P 500 rallying more than 10% since hitting the brink of a bear market on Christmas Eve. Notably, the Dow Jones and S&P 500 have posted their first three-week winning streak since August.
Given this, we have highlighted some ETFs that are off to a good start in 2019 and some that have had a rough start:
Best ETFs
ETFMG Alternative Harvest ETF (SNX:MJ) – Up 23.4%
After being beaten down in the fourth quarter of last year, the marijuana ETF regained momentum to start the year. The pot industry is emerging and poised for rapid growth given its widespread legality and the resultant waves of deals. MJ is the first and only pure ETF targeting the cannabis/marijuana industry. The fund tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 37 securities in its basket and charges 75 bps in annual fees. The ETF has AUM of $716.9 million and trades in a good volume of around 812,000 shares (read: 4 Reasons Why Pot Stocks & ETF Could Be on a High in 2019).
SPDR S&P Oil & Gas Equipment & Services (NYSE:XES) ETF XES – Up 17.9%
Oil price is on tear on falling production and OPEC-led fresh crude output cuts. Hopes over the trade deal between the United States and China also added to the strength. With AUM of $208.1 million, this fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 40 securities in its basket and charges 35 bps in annual fees. The fund trades in a solid average daily volume of 1.5 million shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Oil Heads for Biggest 2-Year Weekly Gain: 5 Top ETFs, Stocks).
ARK Genomic Revolution Multi-Sector ETF ARKG – Up 17.1%
Health care is also performing strongly driven by its non-cyclical nature, which provides a defensive tilt to the portfolio in a turbulent market and encouraging industry fundamentals, including a rising M&A and positive regulatory backdrop. In particular, the surge in demand for artificial intelligence in the advancement of diagnoses and treatment across the health care spectrum has been driving this ETF higher. This is an actively managed ETF focusing on companies that are expected to benefit from extension and enhancement of the quality of human and other life by incorporating technological and scientific developments, improvements and advancements in genomics into their business. The fund holds 35 stocks in its basket and has 0.75% in expense ratio. It has accumulated $299.6 million in its asset base and trades in average daily volume of 157,000 shares.
Worst ETFs
iPath Series B S&P 500 VIX Short-Term Futures ETN VXXB – Down 16.4%
Volatility products turned out to be the major losers to start the year as volatility took the back seat due to positive news flow. The note is linked to the performance of the S&P 500 VIX Short-Term Futures Index Total Return, which provides access to equity market volatility through CBOE Volatility Index futures. The index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the index. The ETF has amassed $166.3 million in its asset base and charges 89 bps in annual fees. It trades in volume of 350,000 shares a day on average (read: 8 New Successful ETFs of 2018).
AdvisorShares Dorsey Wright Short ETF DWSH – Down 11.9%
With a rebound in the stock market, this ETF declined as it adds alpha to an investment portfolio, especially during a bear market. DWSH is an actively managed ETF that short sells U.S. large-cap securities with the highest relative weakness within an investment universe. It holds 103 stocks in its basket and chares higher annual fee of 99 bps. The product trades in lower average daily volume of 30,000 shares and has accumulated $14.1 million in its asset base (read: 8 Top Active ETFs of 2018).
Breakwave Dry Bulk Shipping ETF BDRY – Down 5.9%
Freight movement has been uncertain this year given the myriad of fundamental and sentimental shifts. BDRY is an actively managed ETF that seeks to provide exposure to daily changes in the price of dry bulk freight futures by tracking the performance of a portfolio consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes that measure rates for shipping dry bulk freight. The fund has accumulated about $2.6 million in AUM. It trades in paltry volume of about 1,000 shares per day on average and charges a higher annual fee of 1.72% (see: all the Industrial ETFs here).
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Zacks Investment Research