Welcome back! We hope you had a good Memorial Day holiday.
It has been a fairly busy stretch for exchange-traded products this week, the surge in shares of “meme” stocks is rippling through a number of funds that hold AMC Entertainment Holdings
and some of the other socially driven, assets like BlackBerry
and Bed Bath & Beyond
Meanwhile, the Federal Reserve is unloading some of its $5 billion in ETF and corporate bond holdings accumulated during the height of the COVID chaos last year, the central bank announced on Wednesday.
As per usual, send tips, or feedback, and find me on Twitter at @mdecambre to tell us what we need to be jumping on. Sign up here for ETF Wrap.
Answer to last week’s mystery chart: Ford Motor
The good and the bad
|Top 5 gainers of the past week||%Return|
SPDR S&P Oil & Gas Exploration & Production ETF
VanEck Vectors Rare Earth/Strategic Metals ETF
iShares MSCI Brazil ETF
Global X Uranium ETF
Invesco WilderHill Clean Energy ETF
|Source: FactSet, through Wednesday, June 2, excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater|
|Top 5 decliners of the past week||% Return|
iShares U.S. Medical Devices ETF
Health Care Select Sector SPDR Fund
iShares U.S. Healthcare ETF
iShares Global Healthcare ETF
Vanguard Health Care ETF
Visual of the week
Our visual of the week comes from the folks at Bespoke Investment Group. They note that the standout sector performers so far this year are financials
highlighting the rotation that is under way in the wake of the pandemic.
The rotation can be seen in other ways too, with value themes, representing those assets that have been undervalued by some metric, outperforming growth assets, or those that have consistently produced better earnings or revenues or both.
The iShares S&P 500 Value ETF
is up 17.7% year to date, compared with its growth counterpart, the iShares S&P 500 Growth ETF
which is up 7.1% so far in 2021, FactSet data show. A large part of that outperformance is on the back of crude oil’s
surge to a two-year high and financial stocks climbing as the economy improves.
The big question is will the trend continue.
AMC and GME in ETFs
The record-setting rally for AMC was sending waves through parts of the fund market, particularly among market-cap weighted ETFs.
The SoFi Social 50 ETF
for example, was up 11.2% this week, as of late-morning Thursday. AMC accounted for nearly 24% of the ETF, which was down 6.5% Thursday, from an original allocation of about 5.5%. The ETF tracks an index of 50 U.S. listed stocks that are widely held in brokerage accounts of SoFi
based on a weighted average.
The ETF rebalances monthly, but the surge in AMC highlights the challenges that the social-media driven asset can play on funds and other investments.
Meanwhile, the Invesco Dynamic Leisure and Entertainment ETF
also finds itself in a similar predicament, with a suddenly amplified weighting of AMC.
The fund, which was down over 3% Thursday, had an AMC weighting of more than 18%. It was 10% on Wednesday.
AMC and GameStop are also in a number of other value-oriented ETFs, including the iShares Russell 2000 Value ETF
growing in recent months to become the biggest components of that fund.
It’s probably worth noting that funds that offer exposure to social-media driven trends saw mediocre performance. Despite the meme renaissance, VanEck Vectors Social Sentiment ETF
is up a mere 1% on the week. AMC shares, for example, were up 64%, after a punishing double-digit slump playing out Thursday.
Fed’s other taper: ETFs
The Fed will soon begin selling corporate bonds and ETFs amassed last year through an emergency-lending operation, known as the Secondary Market Corporate Credit Facility.
The SMCCF held $8.56 billion of fixed-income ETFs that also hold corporate debt, including the Vanguard Short-Term Corporate Bond ETF
The divestiture shouldn’t be consider a part of the central bank’s monetary policy plans, with investors focused on the $120 billion a month asset-purchases. However, as the Fed conducts its unwind, signs of disruptions in the market will be closely watched.
The Fed does not own a lot of LQD
but its announced buying provided support for bond market during a period of stress and stability when it was needed, said Todd Rosenbluth, head of ETF and mutual fund research for CFRA, told MarketWatch.
The CFRA analyst recently wrote that fixed-income ETFs comprised an above-average 35% share of insurance company assets at the end of 2020, according to S&P Dow Jones analysis.
He said that those investors may be eager to step in if the Fed is exiting.
“Insurers were net sellers of equity ETFs last year despite a strong recovery from first-quarter lows, but the industry collectively added $5 billion to fixed income ETFs,” Rosenbluth wrote in a report published May 27.
Bio rhythm change?
The $10 billion iShares Nasdaq Biotechnology ETF
which tracks the Nasdaq Biotechnology Index, is changing in line with changes in the index it tracks, Rosenbluth notes. The biotech ETF has registered two back-to-back years of gains nearing 25% in 2019 and again in 2020.
But it is lagging behind the market so far in 2021, down 0.4%. (It’s worthing noting that health-care, generally, was a poor performer this week and a middling performer as per ETF Wrap’s weekly performance table and Visual of the week)
Thirty-two companies will be added to the ETF, including large-caps IQVIA Holdings Inc.
as well as smaller names like Berkeley Lights