U.S. stocks were super steady in August as investors rotated into the beaten-down segments of the year — cyclicals. The Nasdaq 100 rose nearly 11% in August compared to a gain of about 7% for the S&P 500, 6.6% advancement in the Dow Jones and 5.5% rise for the Russell 2000 (read: August Clocks Monster Gains: 5 ETF Areas Up At Least 20%).
However, things took a radical turn on Sep 3 after the S&P 500 posted its worst single-session drop in nearly three months. Some subdued economic datapoints and a monstrous rally in the high-profile tech names (that caused overvaluation concerns) caused the correction.
As a result, Wall Street gave a subdued performance last week. The S&P 500, the Dow Jones and the Nasdaq lost about 2.3%, 1.8% and 3.3%, respectively, past week (as of Sep 4). However, we don’t see the selloff as a sign of rising market fear. Selloffs were worse in tech stocks. The selling trend indicates that winners are emerging as the key losers now and vice versa (read: Don’t Fear Correction: ETF Laggards Are Emerging Leaders).
Against this backdrop, below we highlight a few top-performing ETF areas of last week.
ProShares VIX Short-Term Futures ETF (VIXY) (up 13.7%), iPath Series B SP 500 VIX Short-Term Futures ETN VXX (up 13.1%) and ProShares VIX MidTerm Futures ETF (VIXM) (up 3.7%) were the winners last week. As the stock market went topsy turvy, volatility related products gained.
iPath Series B Bloomberg Coffee Subindex Total Return ETN JO was up 6.3% last week. A weaker dollar (since most commodities are priced in dollars), limited decline in demand and investors’ renewed preference for the commodity investing helped the agriculture space lately, per a senior commodity analyst at Rabobank, as quoted on CNBC. Soft commodities such as coffee, sugar and cocoa have rallied over the past few weeks.
Aberdeen Standard Physical Palladium Shares ETF (PALL) seeks to reflect the performance of the price of physical palladium, less the expenses of the Trust. The price of the metal is pretty much linked with the automotive industry. Notably, the automotive industry, mainly involved in the manufacturing of catalytic converters for vehicles, is a big driver for palladium.
Growing environmental scrutiny of vehicle emissions in China and Europe has clearly favored palladium demand. With the latest rally in cyclical sectors like auto, palladium prices have gained last week. The fundis up 3.7% past week.
Natural gas prices moved higher on weather concerns. Temperatures in the United States are expected to be cooler than normal throughout the mid-west region, resulting in higher demand for heating. Two disturbances formed in the Atlantic that are headed toward the Caribbean that have a 20% probability of turning into a tropical cyclone according to NOAA, as quoted on FxEmpire. As a result, iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ) has added about 2.5% past week.
The Brazilian real hovered at around a one-month high last week as investors braced for on a stable economic recovery following a slew of upbeat data points. Brazil’s private sector economic activity grew in August at its quickest clip in over seven years. New auto sales jumped 5.1%, per Reuters.
The Reuters article noted that Brazil’s government recently presented to congress a constitutional reform bill aimed at streamlining and lowering the cost of its public sector, which gives the president comprehensive powers to remove public sector jobs and bodies without congressional approval.
VanEck Vectors Brazil Small-Cap ETF (BRF) (up 2.6% last week) and iShares MSCI Brazil Small-Cap ETF (EWZS) (up 2.4%) benefited from the trend as rising currency is beneficial for the domestic small-cap equities. This is because small-cap stocks are largely-tied to the domestic economy and gains from an uptrend in economic activities.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report