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Top and Flop Sector ETFs YTD

Zacks Equity Research

Now that we have come halfway through the year 2016, let’s look back at the road traveled so far to find out the top and flop sector ETFs. This is more necessary given that the start and end of the first half of 2016 were extremely tumultuous. While the China meltdown and the oil price crash roiled the market to start 2016, Brexit dismantled it in June.

Not that there were no bullish moments in the meantime, but overall the broader market was lukewarm in 1H16, barring the bounce in the final week of June after the Brexit sell-off. Let’s take a look at which sectors won and the ones that lost it.

Winners

Mining

Mining ETFs have delivered an all-star performance so far this year (as of July 1, 2016) and is continuing with the momentum. The strength was especially felt in the gold mining ETF space as gold saw the best two quarters in nine years.  As the Fed seems to be in no hurry to hike interest rates this year to reflect Brexit-related woes and still-soft U.S. growth, the U.S. dollar has remained soft (read: How to Trade in Gold ETFs After Robust 30-Year Rally?).

This came as a boon for commodity ETFs. Plus, the excessive volatility for the most part of 2016 has kept demand for safe-haven assets like gold and silver alive. Meanwhile, the U.S. economy came up with 16-month high manufacturing data, and spurred demand for industrial metal silver substantially. All these took gold and silver mining ETFs to a sky-high level. Below we highlight three outperformers.

PureFunds ISE Junior Silver ETF SILJ – Up 213%

iShares MSCI Global Silver Miners ETF SLVP – Up 150%

Global X Gold Explorers ETF GLDX – Up 149.5%

Energy

The seesaw ride of oil has been one of the most eye-catchy events of 1H. While Q1 saw a 12-year oil prices, Q2 saw a different trend emerging. In fact, crude prices touched a $50/bbl in Q2 on easing supply glut(read: Inside Surging MLP ETFs).

The curb in supplies mainly emanated from production disruption in Canada due to the Alberta wildfires, militant attacks and the threat of a nationwide strike in Nigeria, the political rout in Venezuela, and reduced shale production in the U.S.

In fact, coal has also staged a price recovery lately due to supply shortage (due to inclement weather in production areas of Australia, Indonesia and Colombia) and better demand. As expected, the energy space is on a tear in the year-to-date frame (read: ETFs to Gain or Lose if Trump Wins Presidential Election).

VanEck Vectors Coal ETF KOL – 51.5%

United States Diesel-Heating Oil Fund UHN – Up 28.5%

Tortoise North American Pipeline Fund TPYP – Up 28.5%

Losers

Biotech

The biotech space has been hit hard this year as investors lost appetite for risk that cursed this high-growth high-beta segment. Also, increased regulatory scrutiny over high drug prices and political uncertainty surrounding healthcare reform in this election year also acted as deterrents. Further, continued deceleration in earnings growth added to the woes. The following funds were among the worst-performers in the space (read: Biotech ETFs Hit 52-Week Lows: Time to Buy?).

BioShares Biotechnology Clinical Trials Fund BBC – Down 35.8%

ALPS Medical Breakthroughs ETF SBIO – Down 26.4%

PowerShares Dynamic Biotechnology and Genome PBE – Down 25.2%

Solar

Solar stocks were under pressure in 1H16. Like biotech, it also paid the price of its high-beta high-growth characteristics. Though not directly related, the oil market rout had a ripple effect on this segment. The common misunderstanding was that consumers dumped solar power and opted for fossil fuels in the wake of an acute plunge in oil prices (read: Solar ETFs Lose Their Shine on Weak Earnings).

Even positive developments like higher panel installations, a shift to fossil-fuel free energy sources by most countries to protect the environment and the U.S. tax credit extension could not help the sector in 1H. As a result, these two solar ETFs lost heavily.

Guggenheim Solar ETF TAN – Down 31.5%

VanEck Vectors Solar Energy ETF KWT – 27.9%

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GUGG-SOLAR (TAN): ETF Research Reports
 
VANECK-SOLR EGY (KWT): ETF Research Reports
 
BIOSH-BIO CLNCL (BBC): ETF Research Reports
 
US-DSL-HTG OIL (UHN): ETF Research Reports
 
GLBL-X GOLD EXP (GLDX): ETF Research Reports
 
PF ISE-JS SC ME (SILJ): ETF Research Reports
 
PWRSH-DYN BIO (PBE): ETF Research Reports
 
TORTS-NA PIPLN (TPYP): ETF Research Reports
 
VANECK-COAL (KOL): ETF Research Reports
 
ISHARS-M GL SLV (SLVP): ETF Research Reports
 
ALPS-MED BRKTH (SBIO): ETF Research Reports
 
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