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Top ETF Events of Wall-Street's Decade-Best June

Sanghamitra Saha

The month of June was outstanding for Wall Street. SPDR S&P 500 ETF (SPY) (up 6.7%),SPDR Dow Jones Industrial Average ETF (DIA) (up 7%) and Invesco QQQ Trust (QQQ) (up 9.8%)— the big three ETFs delivered stellar performances. The S&P 500 had its best June since 1955 and the Dow logged its largest June percentage gainsince 1938.

Dovish comments from the Fed were instrumental in driving the rally. Moreover, stocks suffered a lot in May due to renewed trade tensions, which resulted in cheaper valuation of stocks in June. Interestingly, a dovish Fed boosted every key asset class – stock, bond and gold. Against this backdrop, below we highlight a few ETF events that were the highlights of the month.

Central Banks’ Dovish Comments

As widely expected, the Fed stayed put in its latest meeting but has hinted at rate cuts this year. The central bank will now “closely monitor the implications of incoming information for the economic outlook.” Though the Fed acknowledged the economic wellbeing, it said that “uncertainties about this outlook have increased.”

As a result, bond yields slumped with yield on benchmark treasury yield hovering around 2% at the mon-end – the half-yearly low. Invesco DB US Dollar Index Bullish Fund UUP lost about 0.8% in the past month (as of Jun 28, 2019) (read: ETF Winners & Losers Post Fed Meet).

Not only the Fed, the ECB also adopted a dovish stance. The ECB pushed back the timing of its first-rate hike in nearly eight years to the second half of 2020 at the earliest during its June meeting, thanks to global growth concerns and tepid inflation outlook.

ECB president Draghi hinted that upcoming economic indicators point to persistent softness and the bank could add more stimulus, should the need arise (read: ECB Considers Further Stimulus: ETFs to Top & Flop).

Dow’s Best Performance Since 1938

The Dow Jones posted its best June gain of 7.2% since 1938 when it soared 24.3%.Caterpillar (CAT), Apple (AAPL) and Goldman Sachs (GS) triggered this gain, rallying more than 12% each, per CNBC. The optimism over the resumption of U.S.-China trade talks in late June and a surge in oil price as well as a slew of deal activities led to the bounce (read: Best June for Stocks in Decades: 5 Best ETFs).

Gold Rush

Gold is often viewed as a safe-haven asset offering protection against financial risks, and performs well on heightened market volatility. Investors should note that the U.S. dollar is under pressure on a dovish central bank. Also, Iran has been accused of several oil tanker attacks near the Strait of Hormuz as well as stabbings in oil facilities and an airport in Saudi Arabi in recent months.

Both factors bode well for gold investing and marked its biggest gain since June 2016. SPDR Gold Shares GLD was up 6.5% in June while gold mining ETF VanEck Vectors Gold Miners ETF GDX offered as high as 13.7% in the past month (read: Go for Safe-Haven ETFs Amid Rising Geopolitical Risks).

Best One-Month Semiconductor Gain in More Than 8 Years

Tech gave a moderate performance in June with Technology Select Sector SPDR Fund (XLK) ratcheting up 10.5%. Semiconductors — one of the categories — benefited the most of this rally.VanEck Vectors Semiconductor ETF (SMH) added 12.3% in June, marking the largest one-month gain since September 2010.

This is especially true given that semiconductors sprung in June surviving a 15.5% slump in May due to U.S.-China trade tensions. The news of Trump-Xi discussion in late June actually benefited the semi stocks. Most recently, Trump announced Huawei Technologies — which was on the Entity List — can buy from some U.S. suppliers again. However, gains of semiconductors were curtailed down by losses in the big tech names amid antitrust security fears in June (read: Trump Bans More Chinese Tech Companies: ETFs in Focus).

Oil Rally

Oil soared more than 9% in June on Middle East tensions. United States Oil Fund LP USO and United States Brent Oil Fund LP BNO added about 9.6% and 7.2% in June. Saudi-led OPEC and Russia also extended the output cut deal by six to nine months at the end of the month. Energy Select Sector SPDR Fund XLE advanced 7% in the past month.

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