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ETF Winners & Losers in One-Month Long Government Shutdown

Sanghamitra Saha

It’s been more than one month that the U.S. government has been shut down -— officially the longest on record. A deadlock in passing a spending bill, wherein Trump demanded funding for $5.6 billion for a border wall that is being opposed by the Democrats, is mainly the reason for the shutdown.

Shutdowns normally lower the economy’s productive work hours and revenues. Private sector companies that deal with the government are likely to have their works halted for the time being. As many as 800,000 federal workers are furloughed, which means consumption could be hit. If it runs through Friday, then economic loss would be $6 billion, per S&P Global Ratings predicts.

Trump advisor Larry Kudlow says the partial government shutdown could hurt first-quarter GDP growth but also noted that the economy will recover immediately. The White House now expects the funding delay to reduce 0.1 percentage point from GDP growth every week it lasts.

However, Wall Street has been charged-up during this phase as the S&P 500 and Dow Jones added about 12% and the Nasdaq Composite gained 13.4% (as of Jan 22, 2019). Dovish Fed minutes and signs of improvement in the U.S.-China trade relation boosted the markets.

Against this backdrop, below we highlight a few winning and losing ETFs during the period of government shutdown.

Gainers

ETFMG Alternative Harvest ETF MJ – Up 30.8%

After being beaten down in the final quarter of 2018, pot stocks recoiled at the start of this year on positive industry-specific news and renewed risk appetite. First, the stock of pot-producer Tilray jumped in mid-January, after a private-equity firm, which is the company’s controlling stockholder, affirmed that it won’t sell shares when Tilray’s IPO lockup expires on Jan 15. Also, several research houses have shown positive response in pot stocks of late (read: Why Marijuana ETF is on a High in 2019).

Also, there were news that Canadian marijuana producer Aurora Cannabis is acquiring British Columbia-based Whistler Medical Marijuana for about $132 million. Canopy Growth was also given New York State hemp license.

SPDR S&P Oil & Gas Equipment & Services ETF XES – Up 30.4%    

Oil prices have been rising on a fresh output cut deal from OPEC that would last for the first six months of 2019. United States Oil USO is up 19.7% in the past month. Hopes over the trade deal between the United States and China also added to the strength. As a result, the fund, which measures the performance of the companies engaged in the oil and gas equipment and services industry, gained materially (read: Best & Worst Performing ETFs to Start 2019).

SPDR S&P Biotech ETF XBI – Up 26.8%

Biotechnology stocks are off to their best-ever start to the year. Bristol-Myers Squibb Co. started the year with the acquisition news of Celgene Corp. Analysts have predicted an uptick in mergers and acquisitions of both drugmakers and medical device companies in 2019.

Losers

ProShares VIX Short-Term Futures VIXY – Down 18.3%

As the broader market has been charged up for the maximum period of the partial government shutdown, volatility levels have been pretty low and weighed on the fund.

AdvisorShares Dorsey Wright Short ETF DWSH – Down 19.0%

The fund is actively managed with an investment focus that involves buying securities that have appreciated in price more than the other securities in the investment universe and holding those securities until they underperform.

AGFiQ US Market Neutral Anti-Beta BTAL – Down 4.3%

In an upbeat market, this long/short ETF also underperformed. These funds are worth investing when markets are trending down (read: 5 Long/Short ETFs Handily Beating S&P 500 in 2018).

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SPDR S&P Oil & Gas Equipment & Services ETF (XES): ETF Research Reports
 
US Commodity Funds United States Oil Fund (USO): ETF Research Reports
 
SPDR S&P Biotech ETF (XBI): ETF Research Reports
 
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