Best & Worst ETFs of Coronavirus-Affected January

The month of January has been an eventful one. While Middle-East tensions, coronavirus outbreak and return of global growth worries fettered the broader markets, the phase-one U.S.-China trade deal provided some respite (read: Play 5 Long/Short ETFs to Bypass Middle East Tensions).

The key U.S. indexes’ spectacular 2019 rally faltered to start 2020 as the U.S.-Iran row triggered concerns of a war. While the event induced volatility in the market at the start of January, the signing of the mini trade deal offered some support in the middle of the month. But the IMF’s downbeat global growth projectionsdespite the trade deal dealt a fresh blow. This (read: Economic Slowdown in 2020? ETF Strategies to Help You).

Investors got more anxious at January-end on news of the rapid spread of China’s coronavirus that so far has claimed about 213 lives, with confirmed infected cases of 9692. The World Health Organization (WHO) has termed the outbreak as a global emergency.

Though the outbreak weighed on global stocks, Asian securities were hit the hardest. Over the past month (as of Jan 30, 2020), the S&P 500-based fund SPY, the Nasdaq-100-based fund QQQ and the Dow Jones-based ETF DIA were up 1.5%, 0.8% and 4.2%, respectively. All-world ETF iShares MSCI ACWI ETF ACWI was off 0.05%, while Asia ETF AIA and the China ETF FXI lost about 3.7% and 6.9%, respectively.

Against this backdrop, we highlight a few ETF winners and losers in the tension-stricken January.

Top-Performing ETFs

Pacer Benchmark Industrial Real Estate SCTR ETF (INDS) – Up 7.2%

The outbreak boosted demand for safe-haven assets like U.S. treasuries, which in turn dragged down bond yields and favored rate-sensitive sectors like real estate.

The underlying Benchmark Industrial Real Estate SCTR Index of the fund INDS is composed of the U.S.-listed equity securities of companies that derive revenues from real estate operations in the industrial real estate sector and self-storage real estate operations. The fund yields 2.12% annually (read: Top REIT ETFs: 5G, Cloud Computing & E-Commerce).

Vanguard Extended Duration Treasury Index Fund ETF Shares EDV – Up 7.2%

Bonds were a clear winner in the month on strong demand for safe-haven assets at the beginning and end of January. EDV emerged as the best bond ETF.

Invesco Dynamic Building & Construction ETF PKB – Up 7.1%

This is yet another rate-sensitive sector. Investors should note that the fund invests a lot in homebuilding stocks. The Freddie Mac 30-year mortgage rate has dropped to the lowest since last September, which makes home buying more affordable.

Invesco Solar ETF TAN – Up 7.1%

The solar sector has stood its ground despite all odds. The solar industry has been seeing a rebound in global solar demand. The sector has every reason to gain this election year as most democrat candidates, including Bloomberg, are pledging to end the fossil-fuel era, going completely against President’s Trump’s call. Tesla’s TSLA improving solar division is also driving the space (read: 2 ETF Areas to Gain From Michael Bloomberg's Campaign).

Worst-Performing ETFs

Breakwave Dry Bulk Shipping ETF (BDRY) – Up 34.0%

Shipping stocks saw rough trading as dry bulk freight rates skidded to a multi-month low, weighed down by shrinking demand across all vessel categories. The global dry bulk freight market (the largest commodity shipping segment by volume) has now been witnessing lower earnings.

iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO) – Down 22.8%

Despite the favorable fact that the 2019/2020 crop will be less than last year (which can support coffee prices), unfavorable exchange rate hurt the soft commodity. The U.S. dollar gained 5.5% against the Brazilian real in the past month (as of Jan 30, 2020). Since most commodities are priced-in the U.S. dollar, a rising dollar led the coffee ETN to losses.

Invesco S&P SmallCap Energy ETF (PSCE) – Down 19.3%

The virus eruption and the resultant fear of slowing global growth has hurt demand for oil and wreaked havoc on the energy area as a whole (area: Virus Scare Weighs on Oil ETFs: Go Short for the Near Term).

Barclays Inverse US Treasury Aggregate ETN TAPR – Down 18.4%

The flattening of the U.S. treasury yield curve weighed on the fund. Investors should note that the benchmark 10-year U.S. Treasury yield slumped to 1.57% on Jan 30, 2020 from 1.88% at the start of the year. Meanwhile, the two-month U.S. treasury yield rose to 1.58% from 1.55% at the start of January. The spread between the two treasuries fell from 33 bps to minus one bps on Jan 30. Such inversion hurt the fund.

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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
iShares Asia 50 ETF (AIA): ETF Research Reports
 
Invesco S&P SmallCap Energy ETF (PSCE): ETF Research Reports
 
iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO): ETF Research Reports
 
Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports
 
iShares China Large-Cap ETF (FXI): ETF Research Reports
 
Invesco Solar ETF (TAN): ETF Research Reports
 
Invesco QQQ (QQQ): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Pacer Benchmark Industrial Real Estate SCTR ETF (INDS): ETF Research Reports
 
Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
 
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