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Top and Flop ETFs to Start 2020

Sweta Killa

Stocks across the globe witnessed a solid start to 2020, driven by the initial trade deal, easing policies and upbeat indicators, which suggest that global slowdown may have bottomed out. In particular, the U.S. stock market continued to outperform with all the three major indices reaching new highs on several occasions.

A technology surge, improving economic outlook and Q4 earnings optimism are adding to the strength. Though the Middle East tensions resulted in some volatility in the initial weeks, it has abated for now. Meanwhile, performance of the fixed income world and commodities has been mixed.

Given this, many corners of the market have seen smooth trading while a few still lag. Below, we have highlighted ETFs from the best and worst zones to start 2020.

Best Zones

Palladium


Palladium continued its strong surge this year, hitting new highs, thanks to persistent supply and concerns of supply from major producers South Africa and Russia. Expectations of stricter emission laws across the globe also added to the strength. As a result, Aberdeen Standard Physical Palladium Shares ETF PALL has climbed 26.7% so far this year. The fund seeks to match the price of palladium. It owns palladium bullion in plate or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank. The product has amassed $406.1 million in its asset base and trades in lower volume of about 30,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Top ETF Areas of Last Week).

China

China’s stock market has been riding high on signs of stabilization of the economy and expectations of growth following the phase one of the trade deal. Additionally, hopes of more stimulus are offering support to the stocks. While there are number of China ETFs that are rising, Global X MSCI China Information Technology ETF CHIK is leading the way higher, gaining 13.8%. This fund offers exposure to the information technology sector of China market by tracking the MSCI China Information Technology 10/50 Index. It has accumulated $6.8 million in its asset base and trades in light average daily volume of 4,000 shares. It charges 65 bps in annual fees and has a Zacks ETF Rank #3 (read: After a Solid 2019, 5 China ETFs to Keep Rallying in 2020).

Cannabis

After being beaten badly last year, cannabis stocks staged a nice comeback, given a greater legislative push to legalize recreational marijuana. The latest report shows that up to a dozen states could legalize adult-use or medical marijuana in 2020 through their legislatures or ballot measures. As a result, Global X Cannabis ETF POTX, which seeks to invest in companies across the cannabis industry, has been outperforming with 12.5% gains so far this year. The product has accumulated $8.4 million in its asset base within four months of debut and trades in average daily volume of 16,000 shares. Expense ratio comes in at 0.50% (read: Cannabis ETFs Are Soaring in 2020: Will the Trend Continue?).

Worst Zones

Shipping


Shipping stocks saw rough trading as dry bulk freight rates skidded to its lowest in nine months, weighed down by shrinking demand across all vessel categories. As such, Breakwave Dry Bulk Shipping ETF BDRY fell 21.6% in the first few weeks of 2020. It provides exposure to the daily price movements of the near-dated dry bulk freight futures. The fund has accumulated about $1.2 million in AUM. It trades in a paltry volume of about 5,000 shares per day on average and charges a higher annual fee of 1.85% (see: all the Industrial ETFs here).

Coffee

iPath Series B Bloomberg Coffee Subindex Total Return ETN JO declined 12.8% in the same time frame. It tracks the Bloomberg Coffee Subindex Total Return, which reflects the returns that are potentially available through unleveraged investment in futures contracts on coffee. The ETN has AUM of $75.6 million and average daily volume of 81,000 shares. It charges 45 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Volatility

Though the stock market witnessed bouts of volatility this year, volatility products were the biggest losers. In particular, VelocityShares Daily Long VIX Short-Term ETN VIIX has dropped 12.04%. It seeks to deliver the daily performance of the S&P 500 VIX Short-Term Futures Index, which provides investors with exposure to one or more maturities of futures contracts on the VIX, which reflects implied volatility of the S&P 500 Index at various points along the volatility forward curve. This ETN is unpopular and illiquid with AUM of $18.4 million and average daily volume of 22,000 shares. The note charges 89 bps in annual fees (read: ETF Strategies to Stave Off Middle East Tension).

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