October ETF Performance Report

The first quarter of Q4 passed uneventfully, or rather in a somber way. The return of S&P Earnings into the growth territory couldn’t push U.S. stocks to party as election uncertainty, global growth worries, a likely Fed rate hike by the end of this year and oil price volatility were not reflected on bourses. Among the top ETFs, investors saw the S&P 500-based (AX:SPY) lose about 1.5%, Dow Jones-based (V:DIA) shed over 0.6% and Nasdaq-based QQQ drop over 1.3% in October.

Historically, October is known for moderate equity returns. A consensus carried out from 1950 to 2015 has revealed that October has ended up offering positive returns in 41 years and negative returns in 25 years, with an average return of negative 0.80%, as per moneychimp.com.

That being said, below we highlight the best and worst ETF performers of October (returns are mentioned as per xtf.com).

Toppers

Barclays (LON:BARC) Inverse U.S. Treasury Aggregate ETN (CM:TAPR) – Up 22.6%

Chances of a Fed rate hike by this year-end amid the strengthening of the U.S. economy pushed up bond yields and dragged down bond prices. This went against TAPR which provides investors a unique strategy to hedge against or benefit from the rising U.S. dollar interest rates.

This benchmark employs a strategy, which follows the sum of the returns of the periodically rebalanced short positions in equal face values of each of the 2-year, 5-year, 10-year, long-bond and ultra-long U.S. Treasury futures contracts (read: Prepare for Rising Rates with These Inverse & Hedged Bond ETFs).

VanEck Vectors Coal ETF KOL – Up 11.2%

Coal prices are rising on dwindling supplies. In particular, China implemented a five-day working week for domestic mines and also cut down output to restore the long-ailing coal market. As per Financial Times, the move was designed to boost the profitability of its heavily indebted coal miners. As a result, the ETF targeting the global coal industry, KOL,was up over 11% (read: Top Sectors of Q3 and Their Best ETFs).

WisdomTree Japan Hedged Capital Goods Fund DXJC – Up 8.9%

Japan’s flash manufacturing data indicated “fastest expansion in nine months.” This along with extremely low levels of interest rates probably gave a boost to this capital goods ETF.

iShares MSCI Brazil Capped ETF EWZ – Up 8.3%

Brazil ETFs were on a tear in the month. The ETFs and currency gained despite the Fed rate hike concern, as lawmakers agreed on a proposal to cap increases in public spending. This in turn will help in lowering the near-record budget deficit. Plus, Brazil slashed its rates for the first time in four years in October to boost growth. Some earnings reports in the ongoing reporting cycle have also come in favorable (read: 3 Country ETFs Soaring on Hopes of Oil Output Curb).

Losers

BioShares Biotechnology Clinical Trials Fund (MZ:BBC) – Down 20.9%

Biotech stocks and ETFs were battered as increased regulatory scrutiny over high drug prices and political uncertainty surrounding healthcare reform in the looming presidential election wreaked havoc on this segment. Other biotech ETFs including Loncar Cancer Immunotherapy ETF (CNCR), ALPS Medical Breakthroughs ETF (SI:SBIO) and SPDR S&P Biotech ETF XBI lost substantially in October (read: 4 Frightful ETFs of This Year).

ETFS Physical Palladium (NYSE:PALL) Shares PALL – Down 13.7%

As U.S. dollar strengthened in October as evident from a 2.8% gain in PowerShares DB US Dollar Bullish ETF (NYSE:UUP), precious metal investing got beaten up. Especially, palladium prices took a hit as palladium is used as catalytic converters in cars. With auto sales reeling under pressure, demand for palladium was hurt. So, palladium futures slumped to the three-month low in October on lower physical and investment demand.

iPath Dow Jones-UBS Platinum ETN (AX:PGM) – Down 13.4%

Here also, the automobile industry alone is responsible for about 40% of the world's platinum demand and thus explains why platinum prices tumbled in October.

Sprott Gold Miners ETF (NYSE:GDX) SGDM – Down 13.4%

With the rising greenback and higher chances of Hillary Clinton wining the presidential election, gold prices and gold mining stocks were hit hard. Investors should note that the democratic presidential candidate Hillary Clinton is viewed to favor stocks while republican candidate Trump is perceived to opt for ‘inward looking’ policies and thus aid the safe-haven asset gold (read: Fed or Trump: Who Will Decide the Fate of Gold ETFs?)

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