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.
Well-performing and safe-haven assets have attracted visitors in the week following the dramatic Brexit vote, but underperforming, volatile securities have also caught their eye. Silver and platinum have gained lately, while the Chinese yuan, wheat ETFs, and inverse bonds ETFs have all been pummeled.
Silver: Brexit Surge
The Silver ETFs page has seen its viewership increase 282% week-over-week, as this metal, along with other precious metals, has surged on fears about the potential harming effects of Britain’s decision to leave the European Union on the global economy. But silver has attracted visitors particularly because it has outperformed gold since the Brexit. Silver futures have risen 16% during the period, while gold futures climbed just 8.2%. The iShares Silver Trust (SLV C+) has also performed great, rising 8.42% in the past five days, extending year-to-date gains to as much as 44.81%.
The extraordinary move is clearly due to the metal’s safe-haven appeal, as opposed to increasing demand stemming from its industrial use. There has been increased demand from Chinese investors, perhaps as a result of the declining yuan, which follows next in our trends list. However, silver has enjoyed demand from investors all over the world as well. Many of them are apparently looking for other means to store value as the Brexit vote spurred speculations that central banks in developed markets will provide new stimulus measures, further depressing bond yields — many of which are in negative territory.
The Federal Reserve is hardly expected to raise interest rates anytime soon. The minutes released on Wednesday show the committee is worried about the worsening employment figures, though they admitted it was too early to call an outright slowdown in job growth. The Fed withheld from raising interest rates in June, citing uncertainty around Britain’s vote. Now that the outcome of the referendum is known, the Fed could think twice before making a move, particularly since the vote unleashed high volatility in the financial markets.
Chinese Yuan: The Right Time for a Depreciation
It is unclear whether the Chinese government has taken advantage of the post-Brexit volatility in the financial markets to engineer an under-the-radar depreciation of the yuan to help its struggling exporters. The government has repeatedly denied it had such objectives, but the yuan has been declining steadily since Britain’s referendum. Whatever the reason for the depreciation, the Chinese yuan has lured 156% more readers this week compared to last. Over the past five days, WisdomTree Chinese Yuan Strategy Fund (CYB A+) has fallen 0.74%, extending losses since Brexit to 1.74%. The recent declines in the ETF brought its year-to-date performance slightly into negative territory, to -0.12%.
Looking ahead, the yuan could very well depreciate further against the dollar. Currently one dollar buys 6.68 yuan, but people familiar with the People’s Bank of China’s thinking told Reuters that policymakers would tolerate a fall to 6.8. Foreign exchange data for June are expected to be released soon, giving investors the possibility to see whether the central bank has intervened in the foreign exchange markets.
Wheat: Good Weather Bites
Wheat is the only asset in our list that presumably has no links to the Brexit fallout. However, this agricultural commodity has seen no less volatility. Wheat’s traffic has grown 91% week-over-week, as the futures have been in a freefall lately on good crop forecasts. For example, Teucrium Wheat Fund (WEAT C) has tumbled 5.47% in the past five days, extending losses since the beginning of the year to 13%.
The renewed bout of selling comes after rain forecasts for the upcoming period have been supportive of a bumper crop this year. In addition, about a week ago, the U.S. Department of Agriculture revised up estimations for total corn and all-wheat planted area. Although all-wheat planted area is down 7% compared to last year, it is up 1% compared to a previous estimate.
The fall in wheat prices would have probably been more dramatic if bad news did not come from Europe. Agritel, a consultancy in France, released a pessimistic forecast, as the country, which is a leader in wheat production, has seen its crop destroyed following heavy rains.
Platinum: Welcoming Brexit
Platinum is another precious metal that has sparkled in the aftermath of the Brexit referendum, with uncertainty pushing the metal higher. Traffic to the Platinum ETFs page has increased 66% this past week, compared to the week-ago period, largely due to the metal’s relentless surge lately. ETFS Physical Platinum Shares (PPLT A) has jumped 8.55% in the past five days, extending year-to-date gains to as much as 21.76%.
Platinum’s rise is yet another sign that investors are seeking shelter following the Brexit vote. Central banks in the developed markets are expected to announce further stimulus measures, but it is unclear whether they will work. Bank of England’s Mark Carney recently hinted that policymakers were ready to take swift action in order to support the financial markets. Meanwhile, the European Central Bank said the Brexit could hit the euro area’s economic growth by 0.5%, suggesting further action was a possibility.
And investors have yet another reason to worry. Italian banks are facing a renewed wave of selling, as their balance sheets continue to deteriorate on the back of slow growth and low interest rates. Their bad loans could put at risk the tepid economic recovery in the euro area, and, even worse, it could have spillover effects.
Inverse Bonds: The Wrong Place To Be
Perhaps shorting bonds in this environment is one of the worst moves an investor can make. Bond yields have continued to fall in the post-Brexit debacle, while their prices surged. Inverse Bonds ETFs has seen its traffic increase about 23% this past week, as many short bond ETFs have underperformed. For example, the iPath US Treasury 10-year Bear ETN (DTYS A), an ETF shorting 10-year U.S. treasury notes, has fallen 6.31% in the past five days and as much as 49.43% since the beginning of the year.
Bond yields are hitting record lows as Brexit unleashed new fears about the health of the global economy and sparked speculations that many central banks will not normalize their monetary policies anytime soon.
The Bottom Line
In the hangover week following the Brexit fallout, safe-haven and volatile assets have attracted our readers. Platinum and silver have surged on fears about the consequences on the global economy from Britain leaving the EU trading bloc, while the Chinese yuan has fallen amid broad volatility. Wheat tumbled to record lows on upbeat crop forecasts, while short bonds ETFs have underperformed, given that investors pushed yields down because of expectations that central banks will keep accommodative monetary policies in place for a longer period.
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.