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Top and Flop ETF Areas of August

Sanghamitra Saha

The July upsurge in the key U.S. indexes wavered to start August as stocks slipped mainly on renewed U.S.-China trade tension. Also, the Fed’s less-hawkish guidance on monetary policy released at July-end triggered a broader market rout to start August (read: Fed & Trade Trigger Market Bloodbath: 6 Hot Inverse ETF Areas).

The month was all about announcement of higher import tariffs between the two superpowers. China levied a round of retaliatory tariffs on U.S. goods worth $75 billion in the range of 5% to 10%, which is set to be enacted on Sep 1. The move by China came after the U.S. government announced on Aug 1 that it is levying a 10% tariff to $300 billion worth of Chinese goods. Though Washington delayed some of those tariffs on Aug 13, saying they will be enacted in two tranches, on Sep 1 and Dec 15, the announcement prompted China to counteract.

After markets closed in the United States on Aug 23, Trump said, “he would raise tariffs on $250 billion in Chinese exports to 30% from 25% in October, and that the tariffs kicking in next week will now be 15%, rather than 10%.” The first lot of those tariffs will be introduced in September (read: Consumer ETFs in Focus on Fresh Tariff Threats).

Apart from trade tensions, the month saw a host of global stimulus from various central banks and a bond market rally. Overall, the global stock markets remained edgy. SPDR S&P 500 ETF SPY (down 4.2%), SPDR Dow Jones Industrial Average ETF DIA (down 4.3%) and Invesco QQQ Trust QQQ (down 4.9%) — all lost heavily in the past month (as of Aug 28, 2019).

Against this backdrop, below we highlight a few winning and losing ETF areas of the month.

Toppers

Volatility

Hostility in terms of tariff caused a bloodbath in Wall Street and volatility levels spiked. VelocityShares 1x Long VSTOXX Futures ETN EVIX (up 32.6%), iPath Series B S&P 500 VIX Short-Term Futures ETN VXX (up 32.5%), ProShares VIX Short-Term Futures ETF VIXY (up 32.4%) and VelocityShares VIX Short-Term ETN VIIX (up 32.3%) were the toppers (read: Volatility ETFs Jump on Fresh Trade Tensions & Growth Worries).

U.S. Treasury

Thanks to the market turmoil and the safe-haven rally, yields on the 10-year U.S. treasuries fell drastically in the month. As of Aug 28, the benchmark yield was 1.47%, down from 1.90% seen at the start of the month. This has led to a spike in the long-term bond prices and ETFs like PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund (ZROZ) (up 20.2%) and Vanguard Extended Duration Treasury Index Fund ETF Shares EDV (up 17.9%) benefited greatly.

Precious Metal Miners

Since tariff-related moves and countermoves have shaken the investment world, investors sought safety in the safe-haven asset gold. Also, several global central banks cut rates in recent times, which favored the non-interest-bearing assets like precious metals. Needless to say, the precious metal rally boosted gold and silver-mining ETFs like iShares MSCI Global Gold Miners ETF RING (up 14.2%) and ETFMG Prime Junior Silver ETF SILJ) (up 13.2%) (read: Precious Metal ETFs Gain From Tit-for-Tat Tariff Action).

Losers

Energy

Global growth worries weighed on the demand outlook of oil prices. United States Oil Fund, LP USO was down 1.5% in the past month. Also, U.S. oil rig count fell to the near two-year low, per Baker Hughes data. Market watchers are of the view that “shale producers are cutting back in a bid to conserve capital,” which means “less drilling and fracking work for top oilfield services providers.” SPDR S&P Oil & Gas Equipment & Services ETF XES and iShares U.S. Oil Equipment & Services ETF IEZ lost about 22.3% each in the past month.

Steel Producer

VanEck Vectors Steel ETF SLX lost about 19.3% in the past month. The underlying NYSE Arca Steel Index tracks the overall performance of companies involved in the steel sector. Per a Citigroup analyst, “benefits from the Trump administration’s tariffs on foreign steel imports have diminished and demand has been disappointing,” as quoted on Bloomberg.

Copper Miner

U.S.-China trade tensions have been playing foul on the demand for copper. This is because China is a huge consumer of copper. Any slowdown in China could disrupt the copper-producing industry.Global X Copper Miners ETF (COPX) lost 18.6% in the past month.