Contrary to its ill-repute, August was reasonably pleasant for Wall Street with key indexes like SPDR S&P 500 ETF SPY, SPDR Dow Jones Industrial Average ETF DIA and Invesco QQQ Trust QQQ adding about 3.2%, 2.5% and 5% (as of Aug 30, 2018).
While some segments of the broader market went through the roof, some were hit hard. We thus highlight a few top-and-worst-performing ETFs of the month.
ETFMG Alternative Harvest ETF MJ – Up 24.7%
Thanks to Canada’s legalization of recreational marijuana starting Oct 17, 2018, its cannabis industry has been on a tear this month as renowned beverage companies are taking interest in it.
U.S.-based Constellation Brands STZ expanded its stake in the biggest listed cannabis company Canopy Growth Corporation CGC, while news of U.K.-based liquor maker Diageo Plc DEO of getting into discussions with at least three Canadian cannabis companies to buy a stake or form a partnership has been doing the rounds (read: Pot Stocks Are on a High: Play These Cannabis ETFs).
Earlier this month, the Canadian arm of Molson Coors Brewing Co. and Quebec-based pot producer Hydropothecary Corp. announced plans of making non-alcoholic, cannabis-infused beverages owing to a slowdown in beer sales in North America.
ARK Genomic Revolution Multi-Sector ETF ARKG – Up 17.6%
This is an actively managed ETF focusing on companies that are expected to benefit from enhancement of the quality of human and other life by integrating technological and scientific developments in genomics into their business (read: 8 ETFs Up More Than 25% YTD).
About 25.2% of the fund goes to gene therapy followed by 16% in targeted therapeutics, 15.5% in instrumentation, 14.8% in beyond DNA and 11.3% in bioinformatics. This is a fast-growing industry as the fund’s factsheet shows “by 2022, the cost of sequencing the DNA of a full human genome should drop below $100.” This shows the extent of research and advancement in this field.
Janus Henderson Small Cap Growth Alpha ETF JSML – Up 12.1%
The small-cap segment saw considerable revival in August. Investors should note that the Fed is on track to raise rates faster as long as the U.S. economy continues to do well. Small-cap stocks are likely to do better in a rising rate environment since these are more tied to domestic activities and are thus not hurt in a rising dollar environment (which is a likely outcome). Economic wellbeing in the domestic land is a major positive for small-cap stocks (read: Small-Caps Rule in August: Top-Performing ETFs).
iShares MSCI Turkey ETF TUR – Down 28.9%
The Turkish economy and currency are caught in a web of issues this year. So far, double-digit inflation, aftereffects of policy tightening in the United States, political woes and a complete authoritarian takeover of president Tayyip Erdogan and his influence on monetary policy have affected the economy. Now, a diplomatic tussle with the United States dealt a blow to the economy and market in mid-August. Turkish currency has been on a freefall. It kept falling to new lows in August, having lost more than one-third of its value past month (read: Most-Hurt EM ETFs on Turkey Upheaval).
iShares MSCI Brazil Small-Cap ETF EWZS – Down 16.4%
Brazil’s economy recorded much slower growth in the second quarter due to a trucker strike and electoral uncertainty. GDP in Latin America’s largest economy expanded only 0.1% sequentially in Q2, according to a poll of 23 financial firms. Slowing domestic growth is a huge negative for small-cap stocks.
Meanwhile, there was an opinion poll conducted by XP Investimentos on voter views ahead of this October’s presidential election. The poll showed leftist Fernando Haddad having an upper hand over right-wing frontrunner Jair Bolsonaro while market-friendly centrist Geraldo Alckmin taking the third place, per Reuters. This also acted against the fund.
Sprott Gold Miners ETF SGDM – Down 14.4%
As the dollar rose in August due to strong U.S. economic recovery and prospects of faster Fed rate hikes, gold prices stumbled. Gold miners were also affected as mining companies are often leveraged to the price changes of the underlying commodities.
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