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ETF Winners & Losers of Last Week

ZACKS - Mon Jun 10, 5:00AM CDT

After being battered badly in May, the Wall Street staged a decent comeback with the start of June. This is especially true as the Dow Jones and S&P 500 witnessed their best weekly gain since late November, rising 4.7% and 4.4%, respectively, while Nasdaq saw its best performance since the week ended Dec 28 inching up 3.9%.

The solid gains came on the back of elevated chances of easier monetary policy from the Federal Reserve. The U.S. economy added 75,000 jobs in May. This is the second time in four months that job growth hit less than 1,00,000-mark. Wage growth rate also slowed down last month. This lackluster data spurred speculations about the interest rate cuts.

Per CME Group’s FedWatch tool, expectations of an interest rate cut in June rose to 27.5% from 16.7% after the jobs data release. The market is also pricing in a 79% chance of lower Fed rates by July. Aggravating trade disputes, global recession fears and bouts of weak data triggered a buzz around rate cuts.

Additionally, the Fed Chair Jerome Powell, who has suspended the three-year monetary policy tightening program this year, has signaled his openness to cut rates if needed. Powell commented at the Conference on Monetary Strategy, Tools and Communications Practice last week that “the Fed is closely monitoring the implications of the trade tensions on the economy and would act as appropriate to sustain the expansion, given a strong labor market and inflation near 2% target.” (read: ETFs Set to Soar on Rate Cuts Signal).

Lower rates would make borrowings cheaper, providing a boost to both investment in new projects and repayment of higher-rate debt. As such, it would lead to strong economic growth and is thus, a boon to the stock market. Further, the possibility of rate cuts has put pressure on the U.S. dollar, making the dollar-denominated products cheaper for foreign buyers, thereby raising demand for these products.

Further, the rally came on the heels of the U.S-Mexico deal and that President Donald Trump has suspended planned tariffs against Mexico.

In the light of recent positive developments, here we highlight the best and the worst-performing ETFs to start June:

Best ETFs

Materials Select Sector SPDR XLB


XLB turned out to be winner, gaining 9.1%. This is the most popular material ETF that follows the Materials Select Sector Index. It manages about $3.8 billion in its asset base and trades in volumes as heavy as around 8.2 million shares. In total, the fund holds about 28 securities in its basket with heavy concentration on the top firm at 16.6% while other firms account for not more than 8.4% share. In terms of industrial exposure, chemicals dominate the portfolio with three-fourth share while containers & packaging, and metals & mining round off the top three positions. The product charges 13 bps in fees per year from investors and has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.

Invesco DWA Healthcare Momentum ETF PTH

This fund follows the DWA Healthcare Technical Leaders Index and holds a basket of 46 U.S. companies. The product has AUM of $142.9 million and trades in lower volume of 24,000 shares. Expense ratio came in at 0.60%. Healthcare equipment and supplies take the largest share at 36.1% while biotechnology, and healthcare providers and services round off the next two with double-digit exposure each. PTH was up 7.9% last week and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

SPDR S&P Semiconductor ETF XSD

This fund targets semiconductor segment of the broad technology sector. It tracks the S&P Semiconductor Select Industry Index, holding 34 stocks in its portfolio. It is widely spread across a number of securities with none holding more than 4.9% share. The fund has AUM of $293.1 million and charges 35 bps in fees per year. It trades in average daily volume of 118,000 shares and gained 7.6% last week. XSD carries a Zacks ETF Rank 3 with a High risk outlook (read: Top and Flop ETFs So Far in Q2).

Worst ETFs

VelocityShares Daily Long VIX Short-Term ETN VIIX

Volatility products have been the biggest losers as they underperform when the stock market booms. Particularly, VIIX lost nearly 8% last week. The product is linked to the daily performance of the S&P 500 VIX Short-Term Futures Index, measuring the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It has amassed $44.7 million in AUM and charges 89 bps in fees per year. The fund trades in an average daily volume of 112,000 shares (read: Volatility ETFs Spike on Renewed Trade Tensions).

AdvisorShares Dorsey Wright Short ETF DWSH

With a strong run-up 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 100 stocks in its basket and chares higher annual fee of 99 bps. The product trades in a lower average daily volume of 28,000 shares and has accumulated $18.3 million in its asset base. The ETF was down 5.3% last week.

Xtrackers Harvest CSI 500 China-A Shares Small Cap Fund ASHS

ASHS offers direct exposure to small-cap China A-share equities and follows the China Securities 500 Index. Holding 502 stocks in its basket, it is widely spread across components with none holding more than 0.63% of the assets. The product is often overlooked by investors as depicted by AUM of $67.9 million and an average daily volume of around 60,000 shares. The product charges 65 bps in annual fees and shed 3.8% last week. It is a Zacks #3 Ranked ETF with a High risk outlook.

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Invesco DWA Healthcare Momentum ETF (PTH): ETF Research Reports
 
Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS): ETF Research Reports
 
Materials Select Sector SPDR Fund (XLB): ETF Research Reports
 
VelocityShares VIX Short Term ETN (VIIX): ETF Research Reports
 
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
 
AdvisorShares Dorsey Wright Short ETF (DWSH): ETF Research Reports
 
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Zacks Investment Research
 
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