Global stocks kicked off the second quarter on a strong note thanks to improving economic growth backed by rapid vaccinations, progress on more vaccines and an expanded stimulus. The stronger-than-expected Q1 earnings and solid outlook for the upcoming quarters added to the strength.
However, inflation fears gripped the market in recent weeks leading to a broad sell-off in growth stocks like technology. Rising commodity prices for almost everything from raw materials to food prices to shipping costs have made investors concerned that price pressures will force the central bank to tighten the policies earlier than expected. The latest Fed minutes for the first time revealed the possibility of tapering the asset purchase program if the economy continues to show rapid progress. The central bank is currently buying $80 billion worth of Treasury securities and $40 billion worth of mortgage-backed securities per month (read: Taper Talks to Start Soon? ETFs to Win.
Meanwhile, commodities are on an unstoppable rally on reflation trade and a weaker greenback. China, the world’s largest consumer of raw materials, has been driving commodity prices higher on improving conditions. The world’s second-biggest economy saw a record 18.3% growth in the first quarter of 2021.
Given this, we have highlighted the five best-performing zones and their ETFs halfway through second-quarter 2021:
Shipping
Breakwave Dry Bulk Shipping ETF BDRY has gained the most, surging 58.7% so far this quarter on rising dry bulk shipping rates. As global economies are recovering from the pandemic lows, demand for consumer goods is resulting in a spike in shipping rates. The fund provides exposure to the dry bulk shipping market through a portfolio of near-dated freight futures’ contracts on dry bulk indices. The fund has accumulated about $129.1 million in AUM and trades in a moderate volume of about 1490,000 shares per day on average. It charges a higher annual fee of 3.32% (read: A Deep Dive into the Top Performing ETF).
Gold
The dual tailwind of a weak dollar and rising inflation fears drove the yellow metal’s rally. This is especially true as a weak dollar makes dollar-denominated assets attractive for foreign investors while inflationary pressures bolstered the appeal for the bullion as an inflation hedge. Acting as leveraged plays, gold miners tend to experience more gains than the gold bullion. While most of the gold ETFs are rallying in the second quarter, Sprott Junior Gold Miners ETF (NYSE:GDX) SGDJ has gained 23.5%.
It follows the Solactive Junior Gold Miners Custom Factors Index, which measures the performance of junior gold producers with the strongest revenue growth and junior exploration companies with the strongest stock price momentum. It holds 36 stocks in its basket with the Canadian firms holding the largest share at 38%, followed by Australia (34.6%) and the United States (10.1%). The fund has amassed $141 million in its asset base and trades in a lower volume of around 46,000 shares a day. It charges 50 bps in annual fees from investors (read: Gold Regains Luster: ETF Ways to Tap the Rally).
Tin
Supply issues coupled with acceleration in demand led to higher prices for tin. iPath Bloomberg Tin Subindex Total Return ETN JJT is up 21.7%. The product follows the Bloomberg Tin Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on tin. The ETN has been able to manage $8.1 million in AUM and trades in a moderate volume of roughly 1,000 shares per day. Expense ratio comes in at 0.75%. JJT has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.
Carbon
iPath Global Carbon ETN GRN has gained nearly 21% so far this quarter. This note provides investors with exposure to the Barclays (LON:BARC) Global Carbon II TR USD Index, which measures the performance of the return of futures contracts on carbon emissions credits from the European Union Emission Trading Scheme and the Kyoto Protocol Clean Development Mechanism. The product has amassed $41.7 million in its asset base and charges 75 bps in annual fees. The ETN trades in volume of 15,000 shares per day on average (read: 3 Reasons to Buy Commodity ETFs This Year).
Coffee
Coffee price gained on the prospects of weak crop volumes in Brazil and expectations of an impending rebound in demand. As such, iPath Series B Bloomberg Coffee Subindex Total Return ETN JO is up 19.5%. It tracks the Coffee Subindex Total Return, which reflects the returns that are potentially available through an unleveraged investment in the futures contracts on coffee. The ETN has accumulated $116.1 million in its asset base and trades in an average daily volume of 73,000 shares. It charges 45 bps in annual fees.
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IPATHBB-TIN SI (JJT): ETF Research Reports
SPROTT-JR GLD (NYSE:GLD) M (SGDJ): ETF Research Reports
IPATHBB-COFFEE (JO): ETF Research Reports
IPATH-SB CRBN (GRN): ETF Research Reports
BRKWAVE-DBS ETF (BDRY): ETF Research Reports
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