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.
There hasn’t been a more diverse set of interests among our readers in a while. Perhaps the only tendency that can be extracted from this week’s list is visitor interest in renewable energy; the presence of solar energy and lithium at the top of our list stands to confirm that. Meanwhile, mortgage REITs, infrastructure and Amazon all made it to our list as well for their good performance.
Mortgage REITs: Leaving the Past Behind
Our page tracking ETFs with exposure to mortgage REITs is first on our list this week with a staggering 767% week-over-week growth in viewership. The sector, which had been largely shunned by investors following the 2007 financial crisis, is again gaining traction as the Federal Reserve signaled it will keep interest rates low. The asset class is all the more attractive given the lack of alternatives, with equities and government bonds offering low returns so far this year. The iShares Mortgage Real Estate Capped ETF (REM B), one of the largest ETFs in the space, has jumped 7% since the beginning of the year with its largest holding, Annaly Capital Management (NLY), rising more than double that.
Both Annaly Capital Management and REM were recently touted by prominent investors as strong buys. While Annaly Capital Management was praised by none other than Bill Gross in a recent interview with Barron’s for its 11% yield, low risk assets (government-guaranteed mortgages) and moderate leverage (less than banks), REM was peddled by “The Bond King,” Jeff Gundlach, at the annual Sohn Conference in New York.
In addition, a signal from the Federal Reserve that interest rates will stay low for longer have apparently boosted these ETFs. Mortgage REITs usually earn their income by investing in mortgage-backed securities financed with equity and short-term debt. Low interest rates allow them to keep their financing costs moderate, thus maximizing returns. However, the MBS spreads have gone down lately, putting pressure on these companies’ yields.
Infrastructure: The Calm and the Storm
The infrastructure sector may have caught the attention of our readers for two reasons. First, most ETFs incorporate energy infrastructure firms, which have been recovering along with oil prices. Second, these ETFs contain utilities and industrial firms, which are known for offering a good hideout during times of volatility and turmoil. Indeed, our page tracking these ETFs saw a week-over-week increase in viewership of about 180%. Many of these ETFs have performed well since the beginning of the year, with the iShares Global Infrastructure ETF (IGF A-) rising 10%, for example.
The performance was largely due to a recovery in energy prices, but also because other sectors such as utilities and road companies have grown in value lately amid uncertainty in the global markets. These instruments offer an interesting mix of equities to investors. On the one hand, they provide exposure to the highly volatile energy market. On the other hand, by investing in these ETFs investors bet on historically low-volatility industrial and utility sectors. The mix has been visible in the performance of the ETFs. IGF has fallen 8% over the past 12 months on weak commodity prices, but other energy infrastructure companies have suffered more deeply. Kinder Morgan (KMI), which is part of IGF, has tumbled 60% over the same period.
Lithium: Rally of Hope
Our lithium ETFs page saw 80% more visitors this week compared to the last. There is only one ETF offering exposure to the chemical element used in lithium-Ion batteries, which many hope will drive the next revolution in energy. Global X Lithium ETF (LIT B-) has jumped nearly 4% since last Thursday, extending year-to-date gains to 16%.
The rally has been mainly driven by the hype surrounding Tesla Motors’ (TSLA) Model 3 launch at the end of March. The affordable car has seen orders climb to over 400,000 so far, fueling expectations that demand for lithium will greatly increase in order to power these electric automobiles. But Tesla is not the only source of growth in demand for this commodity. CRU Consulting, an independent commodity analyst, expects Asia’s share of global consumption of lithium to rise to as much as 60% by 2020 from less than half now, as China’s electric vehicle market will grow faster than in other countries.
Solar Energy: Help Not Helping
Solar energy ETFs have taken a beating this year, hit by the high-profile bankruptcy of Sunedison (SUNE). Traffic to our page tracking these ETFs rose 61% week over week, as many instruments snagged despite some good news. Congress recently extended the investment tax credit on solar panel installations until 2022. The tax break was about to expire in December 2016, and many investors had expected demand for solar panels to stall beginning next year.
However, the good news from the government was apparently overshadowed by Sunedison’s bankruptcy and Solarcity’s (SCTY) poor financial results announced on Monday, which missed Wall Street’s expectations. The Guggenheim Solar ETF (TAN B) has fallen nearly 5% over the past week, and is down 30% since the beginning of the year.
Amazon: Winning the Retail Battle
Amazon’s (AMZN) recently announced quarterly earnings report has evidently brought the company into the spotlight. The viewership of our page tracking the stock, which is part of a litany of ETFs, increased 23% week over week. Following the results that comfortably beat analysts’ expectations, shares have jumped more than 17%, reaching fresh all-time highs on Thursday.
But Amazon attracted inspection not only for its earnings but also for its sales figures, which were up 28% compared to the same period last year. The rich report comes in an environment in which classic retailers such as Macy’s (M) and Target (TGT) have been struggling with declining sales and stocks. The divergence in earnings of these retailers could signal a watershed moment for the sector, with Amazon taking the lead in the secular shift from brick-and-mortar to online.
The Bottom Line
This week mortgage REITs have drawn attention from our readers for their good year-to-date performance, boosted by a “lower for longer” mantra preached by the Federal Reserve. As commodity prices rebounded, energy infrastructure companies propped infrastructure ETFs, which took the second place on our list. In addition, the hope of a greener future prompted interest in lithium and solar energy ETFs, while Amazon’s earnings report raised eyebrows.
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.