ETFdb.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.
The drama surrounding Great Britain’s fast-approaching vote on staying in the EU and Brazil hosting the Olympic Games amid political turmoil have caught our readers’ attention this week. Exchange-traded funds with exposure to the British pound and Brazil first and third place in our weekly top, respectively. The other three positions are taken by alternative energy, biotechnology and agricultural commodities.
British Pound: Fearing Brexit
The British pound has had a wild ride since the first poll results on a referendum on Great Britain staying in the EU started coming in. The wilderness has intensified over the past weeks as polls have shown dramatic changes in the public opinion on the matter. These developments have taken a toll on the performance of the country’s currency, which is the worst-performing among its developed market peers. The drama has inevitably attracted viewers to our page tracking ETFs with exposure to the pound, which saw viewership increase 153% week-over-week. Guggenheim CurrencyShares British Pound Sterling Trust (FXB A-) has fallen more than 1% since the beginning of the year and is down over 6% in the past 12 months.
Volatility has been extremely high in the US dollar/British pound pair, particularly over the past few days, when several polls showed increased likelihood of voters choosing Great Britain to leave the European Union. The results of the polls are especially surprising considering that just several weeks ago, it was believed the camp favoring a stay in the EU was gaining ground (See third section of our previous trends article). On June 6, the pound has fallen more than 1% against the dollar before reclaiming its lost ground, and the next day continued its upward ascent. Volatility is here to stay until the referendum takes place in about two weeks, as most traders recognize the vote will be very close. A relief rally is possible in case Britons elect to keep their EU membership, while the National Institute of Economic and Social Research said that the pound would crash about 20% against other currencies if Britain does leave the EU.
Agricultural Commodities: Coming to Life
Our page tracking a swathe of agricultural commodities ETFs has seen its traffic grow by as much as 56% this week compared with the week-ago period, largely because the asset class has shown new signs of life. For instance, PowerShares DB Agriculture (DBA A) has risen over 6% in the past week alone, extending year-to-date gains to as much as 11%.
Agricultural commodities are back in fashion after several years of finding themselves in dire straits. Despite the recent rise, PowerShares DB Agriculture is still down nearly 30% over the past five years. The renewed interest for these commodities comes amid signs of bad weather in South America, which threatens crops of soybeans, sugar and coffee. Wheat futures, meanwhile, have gotten support from rains all over Europe. In addition, a weakening dollar following an underwhelming jobs report in the US has provided further support to the four commodities, which make up 50% of PowerShares DB Agriculture.
Going forward, the situation is less clear. These markets tend to overshoot, and many analysts claim, for example, that soybeans are already overbought.
Brazil: Finding a Way Out of the Woods
Our page tracking ETFs with exposure to Brazil has seen its traffic increase over 51% this past week, as the country prepares to host the Olympic Games and is expected to have an economic boost. iShares MSCI Brazil Capped (EWZ B+) has jumped as much as 8% over the past five days, extending year-to-date gains to a staggering 40%.
But the stellar performance could prove temporary. Shares have been recovering from very low levels along with oil prices. The country’s political future remains uncertain, after a string of corruption scandals involving, among others, Petrobras, the state-controlled publicly listed oil firm. The new interim government led by Michel Temer has promised drastic reforms, but many of its members have their own history of bribery scandals. Temer is now attempting to get support for a set of fiscal austerity measures, including pay cuts to civil servants, in a bid to balance the country’s budget. For this year, however, the lawmakers already approved a record budget deficit.
Biotechnology: Downtrend Still On
Biotechnology stocks have continued their downward slide this week, extending year-to-date performance further into negative territory. Our page tracking biotechnology ETFs saw its viewership jump 37% this past week compared with the last. The iShares Nasdaq Biotechnology (IBB B+) has dropped another 1% this past week and now is down more than 17% since the beginning of the year.
The biotech ETF has performed badly, as several of its most important components experienced setbacks. For instance, Biogen (BIIB) has seen its shares fall 10% over the past five days following news that its multiple sclerosis therapy missed study goals. Opicinumab, one of company’s main experimental drugs, did not provide enough evidence that it was better than a placebo substitute. Alexion Pharmaceuticals (ALXN) shares have also dropped more than 7% in the past week, as its drug Solaris failed to reach primary testing goals. But it could still reach some secondary endpoints in later tests. Biogen and Alexion make up around 12% of iShares Nasdaq Biotechnology.
Alternative Energy Equities: Slowly Rebounding
Our page containing ETFs with exposure to alternative energy equities has registered a traffic increase of around 29% this past week compared with the same period a week ago. PowerShares WilderHill Clean Energy Portfolio (PBW B-), an ETF consisting of green energy firms such as Tesla Motors (TSLA) and Universal Display (OLED), has edged up more than 2% in the past week, but its year-to-date performance remains down nearly 16%.
There are reasons to believe clean energy stocks will continue their rebound going forward, particularly considering the recent tax credit extensions from the US government. Downward pressure could continue if fossil fuel supplies increase, coupled with falling oil prices.
The Bottom Line
This week, readers have shown interest in political events that have moved the markets. While Brexit fears have made the British pound the worst-performing currency among its developed market peers, a new government in Brazil, though interim, has attracted investors to the country’s stock market. Agricultural commodities have shown signs of life amid potential supply disruptions of several key commodities, while biotechnology stocks have continued their downward trend as two important companies missed tests on chief drugs. Finally, alternative energy equities have jumped slightly this week, potentially staging a rebound.
By analyzing how you, our valued readers, search our property each week, we hope to uncover important trends that will help you understand how the market is behaving so you can fine-tune your investment strategy. At the end of the week, we’ll share these trends, giving you better insight into the relevant market events that will allow you to make more valuable decisions for your portfolio.