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Top ETF Stories of Third Quarter

Sanghamitra Saha

We have just wrapped up the third quarter of 2019. The broader market posted a muted performance during this frame mainly due to a flare-up in the U.S.-China trade tensions and the resultant global growth worries.

The S&P 500 and the Nasdaq Composite lost about 0.1% and 1.9%, respectively, in the third quarter while the Dow Jones added 0.4% in Q3 (as of Sep 27, 2019). Let’s see what major ETF events ruled the market in the third quarter.

Ebb and Flow in Trade Tensions

Though the first quarter of the year saw a great start, thanks to easing trade tensions, markets were volatile in the May-August period on heightening of the same. At the start to August, President Trump announced a 10% tariff on $300 billion in Chinese imports that aren’t yet subject to U.S. duties and China retaliated. Though both parties finally delayed higher tariffs till mid-October, trade tensions are still alive and kicking (read: After Upbeat July, Will Semiconductor ETFs Slump in August?).

This makes us look at the trade-sensitive semiconductor ETFs like SPDR S&P Semiconductor ETF XSD, iShares PHLX Semiconductor ETF SOXX, VanEck Vectors Semiconductor ETF SMH and First Trust NASDAQ Semiconductor ETF FTXL. The funds are up 2.9%, 3.0%, 4.0% and 3.6%, respectively, despite trade worries. However, the broader tech ETF Technology Select Sector SPDR Fund XLK was off 1.9% in Q3 (as of Sep 27, 2019).

Saudi Oil Attack

Oil price which has been reeling under pressure on global growth worries, staged a nice comeback in September after an attack on Saudi’s oilfields eliminated about 5% of global supplies in mid-September. Overall, United States Oil Fund LP USO was off 5% in Q3 while the fund has gained about 1.7% in the past month (as of Sep 27, 2019) (read: Profit From the Oil Rush With These ETFs).

Global Policy Easing

Amid global growth concerns sparked by unceasing trade tensions, a rate cut cycle is in motion for many economies. In the quarter, central banks in New Zealand, India, Thailand, South Korea, Indonesia, Turkey and South Africa resorted to rate cuts in order to keep signs of a slowdown at bay (read: Play Global Bond ETFs to Join Central Banks' Rate Cut Euphoria).

Apart from this, the Fed and the ECB cut rates in the month. The ECB also rolled out QE measures. Such measures dragged down bond yields. International bond ETFs like iShares International Treasury Bond ETF IGOV, iShares Core International Aggregate Bond ETF IAGG , SPDR Barclays International Treasury Bond BWX Vanguard Total International Bond Index Fund ETF Shares BNDX , SPDR Barclays Capital International Corporate Bond ETF IBND and Vanguard Total World Bond ETF BNDW gained from these central bank steps (read: Play Global Bond ETFs to Join Central Banks' Rate Cut Euphoria).

Gold Rally

Gold prices have been on a tear, of late, with SPDR Gold Shares GLD rallying 8% (as of Sep 27, 2019) compared with the S&P 500’s 0.1% loss. Heightened tensions related to the U.S.-China trade war in recent months have led to this upsurge. Also, a barrage of rate cuts, Brexit uncertainty and the upcoming U.S. presidential election have played a crucial role in boosting the yellow metal (read: 5 Reasons to Buy Gold ETFs as Price May Touch $2000).

Trump Impeachment Talks

There was an effort by Democrats in favor of impeachment of President Donald Trump. Speaker Nancy Pelosi recently said that the U.S. House of Representatives will launch a formal impeachment inquiry into Trump.

The announcement followed reports that Trump may have used his powers wrongly and “sought help from a foreign government to undermine former Vice President Joe Biden, the current Democratic frontrunner, and help his own reelection.” With this, Donald Trump has become the “fourth U.S. president to face impeachment”. No wonder, such things are bound to create volatility in the market.

Low volatility ETFs like Franklin Liberty U.S. Low Volatility ETF FLLV, SPDR SSGA US Large Cap Low Volatility Index ETF LGLV and Invesco S&P 500 Low Volatility ETF SPLV added 1.2%, 2.2% and 4.5%, respectively, in the third quarter.

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