By Christine Idzelis
Hello! In this week’s ETF wrap, you’ll see the funds that soared in May and those that suffered. I’ll also give you a look at how ETF flows shook out last month.
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Some of the biggest gains for exchange-traded funds in May were linked to inflation seen in commodities such as energy, while blockchain ETFs struggled as bitcoin fell.
Shares of BlackRock’s iShares MSCI Chile ETF (BATS:ECH) topped the list of best performers, soaring nearly 19.7% in May, followed by the United States Gasoline Fund LP’s (PSE:UGA) rise of 19.6%, according to an Instinet note on May 31.
Shares of the SPDR S&P Oil & Gas Exploration & Production ETF (PSE:XOP) had the third largest gains at 17.3% last month, the note shows, while the Energy Select Sector SPDR Fund (PSE:XLE) climbed 16% amid higher oil prices and the SonicShares Global Shipping ETF (PSE:BOAT) rose 13.8% as supply chains remained under pressure.
The iShares MSCI Chile ETFChile ETF saw strong performance as it has “high exposure” to the materials sector, which has benefited from inflation and the Russia-Ukraine war, according to Aniket Ullal, head of ETF data and analytics at CFRA Research. The energy-related ETFs, meanwhile, soared last month as crude oil and gasoline prices (NYM:RB00) climbed.
West Texas Intermediate crude for July delivery rose 0.5% on June 1 to settle at $115.26 a barrel, after the U.S. oil benchmark jumped 9.5% in May . Americans are paying more at the pump this year. Regular unleaded gas prices averaged $4.715 in the U.S. on Thursday, up from $4.194 a month ago and rising from $3.041 a year earlier, according to AAA Gas Prices .
“Some of the drivers of energy prices appear to be longer-term trends,” such as the Russia-Ukraine war, which has prompted the European Union to cut down on Russian oil imports , Ullal said in a phone interview. “We do expect elevated energy prices for some time.”
Shares of the United States Gasoline Fund have skyrocketed 85% this year through Wednesday, according to FactSet data. The SPDR S&P Oil & Gas Exploration & Production ETF soared more than 66% over the same period, while the Energy Select Sector SPDR Fund climbed almost 60%.
In a tough month for crypto assets, blockchain ETFs struggled in May.
For example, shares of the Amplify Transformational Data Sharing ETF (PSE:BLOK) , an actively managed fund that invests in companies involved in blockchain technology, was among the worst performing exchange-traded funds in May with an almost 14% loss, according to Instinet.
Amplify’s ETF, which began trading in January 2018 and had more than $650 million of assets on June 1, is “falling victim” to stock-market volatility at a time when bitcoin has “a high correlation of late to the Nasdaq,” according to Christian Magoon, chief executive officer of Amplify ETFs.
The Nasdaq 100 Index (NASDAQ:NDX) is down about 23% this year through Wednesday, according to FactSet data.
“We love the promise and the growth path for blockchain,” Magoon said by phone. “That’s what bitcoin is built on.”
Bitcoin prices (COINDESK:BTCUSD) dropped around 17% in May, and the cryptocurrency has traded below $30,000 this month. On Thursday afternoon, bitcoin was up around 2% at $30,254.
Bitcoin “really needs to trade back above $40k before any kind of bullish outlook can be confirmed,” said Nicholas Cawley, strategist at DailyFX, in emailed comments Wednesday. “The technical outlook is neutral at best.”
Much smaller blockchain ETFs that launched in the past year were also hurt in May.
Shares of Global X Blockchain ETF (NAS:BKCH) , which launched in July 2021 and has about $68 million of assets at the start of June, tumbled 25% in May, according to FactSet data. The iShares Blockchain and Tech ETF (PSE:IBLC) , which began trading in late April and had $6 million of assets under management on June 1, fell almost 19% last month, while shares of the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BATS:BLKC) , with about $3 million of assets at the start of this month after launching in October, sank nearly 11%, FactSet data show.
Blockchain ETFs have been hurt by the drop in bitcoin, as the stocks they hold tend to be in related areas such as bitcoin miners, according to CFRA’s Ullal.
Ullal doesn’t have a view on whether the value of bitcoin will go up or down, but he said “we are optimistic about the applications around blockchain technologies.” The underlying technologies have “a lot of merit,” he said, adding that ETFs focused on blockchain stand to “bounce back” as the area evolves over the next few years with applications beyond crypto.
May ETF flows
Investors poured $69 billion into U.S.-listed ETFs in May, but only 54% of the funds had inflows, compared with the historical average of 64%, according to a State Street Global Advisors report dated May 31.
Equity ETFs had the most inflows, at almost $39 billion, while fixed-income funds attracted about $34 billion, the report shows. Commodity ETFs saw about $3.6 billion of outflows.
“As of right now 65% of all global stocks are trading in a bear market, even after the best weekly rally in 18 months during the last week of May,” said Matthew Bartolini, head of SPDR Americas research, in the State Street report.
Here’s your weekly look at the best and worst performing ETFs over the past week through Wednesday, according to FactSet.
KraneShares CSI China Internet ETF (PSE:KWEB) : 12.0%
EMQQ The Emerging Markets Internet & Ecommerce ETF (PSE:EMQQ) : 8.1%
First Trust Natural Gas ETF (PSE:FCG) : 7.9%
Fidelity MSCI Consumer Discretionary Index (PSE:FDIS) : 7.6%
Vanguard Consumer Discretionary ETF (PSE:VCR) : 7.5%
Teucrium Wheat Fund (PSE:WEAT) : -8.1
Vanguard Extended Duration Treasury ETF (PSE:EDV) : -3.1
Vanguard Long-Term Treasury ETF (NAS:VGLT) : -2.6%
PIMCO 15+ Year US TIPS Index ETF (PSE:LTPZ) : -2.0%
AdvisorShares Pure US Cannabis ETF (PSE:MSOS) (MSOS): -1.6%
Source: FactSet data through Wednesday June 1, excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater.
Direxion announced June 1 that it was launching the Direxion Break Breakfast Commodities Strategy ETF (PSE:BRKY) , saying its “provides access to commodities whose prices are increasing due to supply chain pressures, geopolitical tensions, and weather-related issues.” The new fund tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index, which includes corn, coffee, lean hogs (bacon), orange juice concentrate, sugar and wheat.
ProcureAM said June 1 that it launched the Procure Disaster Recovery Strategy ETF (NAS:FEMA) , a fund that tracks the VettaFi Natural Disaster Response and Mitigation Index. The index consists of four investment categories, including climatological, geophysical, hydrological and meteorological, according to the announcement .
Weekly ETF reads
Fund industry heavyweights muscle in on ETF market (Financial Times)
May Dividend ETF Report: New Format, Plus My Top Picks For June (Seeking Alpha)
Investors Are Diving Back Into Treasury Bond ETFs (VettaFi’s ETF Trends)