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ETF Performance Report: August


U.S. equities and stock exchange traded funds were moseying along during most of August but experienced a precipitous plunge in the later half of the month after volatility in China and an unclear Federal Reserve policy outlook triggered a market correction.

Over August, the Dow Jones Industrial Average fell 6.6%, the Nasdaq Composite decreased 7.0% and the S&P 500 dropped 6.3%.

The best performing non-leveraged ETFs over the past month include the C-Tracks on Citi Volatility Index ETN (CVOL) up 89.3%, ProShares VIX Short-Term Futures ETF (VIXY) up 67.7% and iPath S&P 500 VIX Short Term Futures ETN (VXX) up 67.6%.

During the initial plunge in the equities market, the CBOE Volatility Index, a measure of the fear in the market place, surged past 51, a level not reached since the financial crisis, reports Callie Bost for Bloomberg.

“Seeing the VIX at 50 was just chaotic,” Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co., told Bloomberg. “It’s not like there was a headline that a bank had filed for bankruptcy or a major corporation was teetering on the brink. Why did it move that much?”

The VIX now sits at about 31.9, which is still much higher than its low range of 12 to 13 through earlier this year. The VIX has historically fallen between 15 and 20.

The worst performing non-leveraged exchange traded products over the past month include the Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) down 22.6%, Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (ASHS) down 22.1% and Market Vectors Solar Energy ETF (KWT) down 20.4%.

The equities market was moving in sideways trading through mid-August on a mix of stronger U.S. economic data and volatility overseas, notably in China.

However,  the FOMC meeting in mid-August hinted that the economic data points may not have been strong enough to warrant a Fed policy shift, which triggered a market sell-off.

The initial fall triggered additional panic selling as investors pointed to weakness in both China and emerging markets where currency devaluations were dragging on the economies. The selling snowballed and dragged down benchmark indices below their long-term trends and into correction territory.

Toward the end of the month, bargain hunters entered the market to pick up where sellers left off, fueling a small bounce in equities. Nevertheless, the stock market still experienced volatility and large intra-day swings.

For more information on ETF performance, visit our ETF performance reports category.

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Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.