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5 Top & Flop ETF Areas of Q2

Sanghamitra Saha

Wall Street had a moderate second quarter this year with the S&P 500, the Dow Jones and the Nasdaq adding 3.4%, 2.1% and 3.1%, respectively. After an upbeat April and May swoon, Wall Street logged the best June gains in decades.

Trade tensions that caused severe market turmoil in May have probably made the market oversold and cheaper-valued, on which June continued to build up its gains. Dovish Fed comments, chances of a U.S.-China trade truce and likelihood of continuation of OPEC output cut led to this stellar gain.

Against this backdrop, below we highlight a few best-and-worst performing ETFs of June.

Dry Bulk Shipping

BDRY is an actively managed ETF that seeks to provide exposure to daily changes in the price of dry bulk freight futures. Though the freight rate market is not in a good position, there has been slight improvement of late. Breakwave Dry Bulk Shipping ETF (BDRY) added 40.5% in the second quarter(read: ETFs That Topped & Flopped in Q1).

Solar

An announcement from the U.S. trade delegation that a particular type of solar panel is being taken out from the tariff list probably boosted solar stocks in the quarter, per a source. Some of the holdings of the fund TAN — Canadian Solar and Jinko — shot up on the announcement.

Also, there is news that some states, including California, are using solar subsidies to boost the adoption of solar power. California, in fact, mandated all new homes built starting in 2020 to have solar power. The likelihood of Chinese subsidies acted as another catalyst. Invesco Solar ETF (TAN) added 22.1% (read: 6 Top ETFs of April).

Greece

The Greek stock market has been on a tear on a recovering economy. There has been a rise in liquidity in local financial institutions. Banks have almost repaid emergency European Central Bank (ECB) liquidity assistance, per Global X report. In March, Moody’s raised Greece’s long-term debt rating by two notches. A big defeat of the ruling leftist coalition in regional and Euro elections has added to the strength.Global X MSCI Greece ETF (GREK) was up 19.4%.

Argentina

After the 2018 swoon, Argentina’s stock market rebounded this year. Argentina's central bank’s move to introduce a tighter monetary policy late last year to curtail the peso's slide and curb inflation has started to pay off. A dovish Fed and moderate strength in the greenback are other positives. iShares MSCI Argentina and Global Exposure ETF (AGT) (up 17.7%) and Global X MSCI Argentina ETFARGT) (up 17.5%) gained from the trend (read: Top Performing Country ETFs of 1H). 

Gold Mining

Gold had a stellar June (its best month in three years) thanks to dovish Fed comments and a safe-haven rally amid fears of heightened tariff wars and geopolitical tensions. Since mining stocks are leveraged plays of the underlying metal, gold mining stocks went through the roof in the second quarter. iShares MSCI Global Gold Miners ETF RING (up 17.2%) and Sprott Gold Miners ETF SGDM (up 16.2%) are the toppers in this segment.

Flop ETFs

Media

FAANG stocks suffered in the quarter amid Anti-Trust scrutiny fears. Government regulators are setting the stage for potential antitrust probes into four technology giants, namely Apple AAPL, Facebook FB, Amazon AMZN and Alphabet GOOGL. AdvisorShares New Tech And Media ETF FNG (down 21.5%) led the slump.

Inverse Treasury

Amid lower rates, bond yields fell, boosting the price of U.S. Treasury ETFs. Thus, Barclays Inverse US Treasury Aggregate ETN TAPR shed about 20.9% in the quarter.

Oil Services

Investors should note that the S&P downgraded Halliburton HAL and Schlumberger SLB in late May. The news dealt a blow to oil service stocks. "Oilfield services companies will no longer be able to generate the high operating margins they did in 2014," S&P analyst Carin Dehne-Kiley said in the note.

Also, U.S. oil rig count fell to the lowest since February 2018, per Baker Hughes data. Market watchers are of the view that “shale producers are cutting back in a bid to conserve capital,” which means “less drilling and fracking work for top oilfield services providers.” SPDR S&P Oil & Gas Equipment & Services ETFXES and VanEck Vectors Oil Services ETF OIH lost 16.6% and 14% in the quarter, respectively (read: What Went Wrong With Oil Services ETFs in May?).

Natural Gas

U.S. natural gas reached its lowest price level since May 2016on ample supplies. Four-year low natural gas prices aren’t likely to turn around materially until there is some forecast of inclement weather, which can boost demand for the commodity. First Trust Natural Gas ETF FCG and United States Natural Gas Fund, LP UNG lost about 15.4% and 15.3%, respectively, in the quarter (read: Will Natural Gas ETFs Recover in the Near Term?).

Marijuana

After a rally in the beginning of the year, price of marijuana fell in the second quarter probably on overvaluation concerns. ETFMG Alternative Harvest ETF MJ retreated about 12.4% in the quarter.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Facebook, Inc. (FB) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
First Trust Natural Gas ETF (FCG): ETF Research Reports
 
SPDR S&P Oil & Gas Equipment & Services ETF (XES): ETF Research Reports
 
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
 
VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
 
Barclays Inverse US Treasury Composite ETN (TAPR): ETF Research Reports
 
Sprott Gold Miners ETF (SGDM): ETF Research Reports
 
Invesco Solar ETF (TAN): ETF Research Reports
 
Global X MSCI Greece ETF (GREK): ETF Research Reports
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Agilent Technologies, Inc. (A) : Free Stock Analysis Report
 
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