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Top ETF Stories of January 2020

Sanghamitra Saha

The first month of 2020 was volatile for Wall Street due to a host of negative events globally, starting from the Middle East tension to the coronavirus outbreak. Global growth worries also resurfaced in the month.

The key U.S. index S&P 500 crossed the 3,200-mark for the first time in mid-January due to the signing of the trade deal while Wall Street logged a sharp slump to close out the month, reacting to the rising fear from coronavirus (read: S&P 500 Up 1000 Points in a Month: 10 Stocks Boosted the ETF).

Overall, the S&P 500-based ETF SPY and the Dow Jones-based ETF DIA have lost about 1% and 2.1%, respectively in the past one month (as of Jan 31, 2020). The Nasdaq-100-based ETF QQQ advanced about 1.4%. However, emerging market ETF EEM, China A-Shares ETF ASHR and Asia ETF AIA shed 6.2%, 10.9% and 5.8%, respectively (read: Wining & Losing ETF Areas on Coronavirus Outbreak).

Let’s have a look at the key ETF events in the month of January.

Coronavirus Outbreak

The outbreak of SARS (severe acute respiratory syndrome)-like coronavirus in late January was the main event. The source of the virus was Wuhan, China. The virus has so far taken more than 300 lives in Mainland China and infected more than 14,500 people globally, mostly in China.

To contain the medical emergency, several Chinese cities have been locked down. The United States, India, Australia, Indonesia, Singapore, Israel, Russia, New Zealand and the Philippines have all enacted restrictions on visitors from China.

Needless to say, such restrictions hurt the travel and tourism sector.U.S. Global Jets ETF JETS has lost about 5.3% in the past month. Casino ETF VanEck Vectors Gaming ETF BJK, which has considerable exposure to China retreated about 5.1%.

Middle East Tensions

The start of 2020 was not smooth for the market thanks to the rise in geopolitical tension in the Middle East. It all started with a New Year Eve attack by Iran-backed militias on the U.S. Embassy in Baghdad, which was retaliated by a U.S. drone strike near the Baghdad international airport that killed an Iranian military leader.The U.S. move then faced a counter retaliation in the form of a missile strike by Iran at the American bases in Iraq on Jan 7. Markets went volatile on this and oil prices shot up (read: ETF Strategies to Stave Off Middle East Tension).

Stellar January for Safe-Haven Assets

When risk-on trade subsides, the common investing practice is to turn to safe-haven trades. So, a dovish Fed and geopolitical concerns had every reason for benefit safe assets. The benchmark 10-year U.S. treasury yield slumped from 1.88% to 1.51% in January. Gold ETF SPDR Gold Shares (GLD) added 4.5% while Vanguard Extended Duration Treasury Index Fund ETF Shares (EDV) advanced 10.3% in the past month (as of Jan 31, 2020). The global hoard of gold in exchange-traded funds touched the highest level in seven years.

Worst Month for Emerging Markets Since August

January was the most painful month for emerging markets since August due to the coronavirus threat. Economists expect China's economic growth to slip to 5% or even lower due to the outbreak. The warning did not bode well for the Chinese currency. Market Vectors-Renminbi/USD ETN CNY was up 0.5% in the past month (read: Currency ETF Winners & Losers From Coronavirus Outbreak).

Signing of Trade Deals

The month of January saw the signing of the phase-one U.S.-China trade deal as well as the USMCA deal with Mexico and Canada. Such deals offered support to the market to a great extent and minimized the impact of coronavirus-and-Iran-induced selloffs (read: Phase-One Trade Deal to Boost These ETF Areas).

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Market Vectors-Chinese Renminbi/USD ETN (CNY): ETF Research Reports
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ETF Research Reports
iShares Asia 50 ETF (AIA): ETF Research Reports
SPDR Gold Shares (GLD): ETF Research Reports
VanEck Vectors Gaming ETF (BJK): ETF Research Reports
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