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Top ETF Stories of First Quarter

Sanghamitra Saha

The first quarter of 2020 has been fraught with worries for Wall Street, starting from the Middle-East tensions to the coronavirus outbreak. Global recessionary fears resurfaced in the quarter. S&P 500 Index, the Dow Jones and the Nasdaq lost about 21.3%, 24.2% and 16.4%, respectively, in the quarter (as of Mar 27, 2020).

Let’s take a look at the key ETF events of Q1.

Coronavirus Outbreak

The outbreak of SARS (severe acute respiratory syndrome)-like coronavirus in late January was the main event of the quarter. The source of the virus was Wuhan, China and it then spread into the other parts of the world. At the time of writing, the virus infected more than 700,000 people globally. To contain the contagion, several cities across the world have been locked down.

While almost all corners of the investing world have suffered badly, widespread travel restrictions have hurt the travel and tourism sector. U.S. Global Jets ETF (JETS has lost about 50% in the quarter.

Oil Price Crash

Oil prices nosedived to an 18-year low in March on global recessionary fears and price war between the Saudi and Russia. Notably, Russia objected to Saudi Arabia’s proposed plan to cut production to manage the impact of coronavirus, probably to win back its title of the world’s largest oil producer that it lost to America in 2018. At this, Saudi Arabia decided to increase crude output starting April (read: Oil Firms May Cut Dividends Ahead: ETFs & Stocks in Focus).

United States Oil Fund LP USO and United States Brent Oil Fund LP BNO lost about 66.7% and 62.4%, respectively, in Q1.

Wall Street Slipped Into Bear Market

Wall Street’s record bull run ended on Mar 12 as all three key U.S. equity gauges — the S&P 500, the Dow Jones and the Nasdaq Composite — entered the bear market territory. The three indexes lost about 9.5%, 10% and 9.4% on Mar 12, respectively, despite the Fed’s around $1.5-trillion liquidity injection into the short-term lending market that time (read: Wall Street Enters Bear Market: ETFs That Are Near 52-Week High).

Global Policy Easing With Fed Opening Crisis-Era Playbook

Failing to contain the coronavirus-led acute market rout by its crisis-era policy launch, the Federal Reserve announced a fresh set of stimuli on Mar 23. The Fed said that the purchases of Treasury and mortgage securities are unlimited.

The Fed also indicated buying of investment-grade corporate bonds and muni bonds. As a result, iShares iBoxx USD Investment Grade Corporate Bond ETF LQD amassed about $1.79 billion in assets in the first quarter(read: All-Out Fed Support: Buy Highly-Rated Corporate Bond ETFs).

Among other notable central banks, the European Central Bank (ECB) has announced a new, expanded program to buy up to 750 billion euros ($820 billion) in government and private sector bonds as well as commercial paper by year-end. This announcement followed the central bank’s previous stimulus to support bank lending and the expansion of its asset purchase program by 120 billion euros ($135.28 billion). Apart from these, many other central banks resorted to rate cuts and QE (read: ETFs to Gain on ECB's Coronavirus Emergency Stimulus Rollout).

Some of the international ETFs that outperformed the S&P 500 in Q1 are First Trust Dow Jones International Internet ETF FDNI (down about 8.6%), First Trust International Equity Opportunities ETF FPXI (down 9.2%) and iShares Edge MSCI Intl Momentum Factor ETF IMTM">(IMTM) (down 14.2%).

Treasury ETFs Held Heads High

In the first quarter, benchmark U.S. treasury yields dropped to a record low of 0.54% on Mar 9.  Best-performing Treasury ETFs have been PIMCO 25+ Year Zero Coupon US Treasury Index Fund ZROZ (up around 34.4%) and Vanguard Ext Duration Treasury ETFEDV (up about 32.5%).

Defensive Investing Rule

As the global stock market slumped, defensive ETFs ruled the quarter. Among the top-performers, notable ETFs were AdvisorShares Dorsey Wright Short ETF DWSH (up 55.2%), AGFiQ U.S. Market Neutral Momentum Fund( MOM (up 24.1%) and AGFiQ U.S. Market Neutral Anti-Beta Fund BTAL (up 16.8%).

Video Games & Esports Crowned Best Equity Area

Increasing coronavirus-induced lockdowns (in several countries) and self-isolation led to an increase in video game usage and live streaming. Plus, the video-gaming industry is waiting for a “new super cycle.”

There are Sony’s SNE expected launch of PlayStation 5 and Microsoft’s MSFT impending presentation of its “next-gen” console — Project Scarlett — in the holiday season of 2020. VanEck Vectors Video Gaming and eSports ETF ESPO and Global X Video Games & Esports ETF HERO have added 1.3% and lost just 0.7%, respectively so far this year despite the global market bloodbath (read: 2 Solid Reasons to Bet on Video Gaming Stocks & ETFs Now).

Bear Market Rally at Quarter-End

Thanks mainly to the $2 trillion worth of U.S. coronavirus stimulus bill, Wall Street staged a bear market rally at March-end. The S&P 500, the Dow Jones and the Nasdaq added 10.3%, 12.8% and 9.1%, respectively, last week. Several global markets followed suit. Marijuana ETFs like The Cannabis ETF THCX, Global X Cannabis ETF POTX stole the show (read: Top ETF Areas of Last Week).

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Sony Corporation (SNE) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Altria Group, Inc. (MO) : Free Stock Analysis Report
 
Global X Video Games & Esports ETF (HERO): ETF Research Reports
 
United States Oil ETF (USO): ETF Research Reports
 
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD): ETF Research Reports
 
U.S. Global Jets ETF (JETS): ETF Research Reports
 
AGFiQ US Market Neutral Anti-Beta ETF (BTAL): ETF Research Reports
 
United States Brent Oil ETF (BNO): ETF Research Reports
 
First Trust International Equity Opportunities ETF (FPXI): ETF Research Reports
 
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ): ETF Research Reports
 
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
 
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
 
First Trust Dow Jones International Internet ETF (FDNI): ETF Research Reports
 
Dominion Energy Inc. (D) : Free Stock Analysis Report
 
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