By Christine Idzelis
Hello! This is markets reporter Christine Idzelis stepping in today for MarketWatch’s Mark DeCambre to bring you this week’s ETF Wrap.
Investors poured capital into U.S. exchange-traded funds in October, based on a report this week from State Street Global Advisors and a conversation with the firm’s head of SPDR Americas Research, Matthew Bartolini.
“TIPs have just been absolutely smashing records,” Bartolini told MarketWatch, with investors flocking to ETFs that provide exposure to U.S. Treasury inflation-protected securities amid fears over the rising cost of living in the pandemic.
You’ll also get a look at a new climate ETF from Impact Shares and the United Nations that began trading this week as world leaders gathered in Glasgow for the U.N.’s COP26 summit , with the aim of curbing global warming by cutting carbon emissions.
But first, here’s your weekly screen of the biggest ups and downs in ETFs, including a pair of clean energy funds that ranked among the top moves higher.
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|Top 5 gainers of the past week||%Performance|
|Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK||12.5|
|Invesco WilderHill Clean Energy ETF /zigman2/quotes/208932878/composite PBW||10.2|
|First Trust NASDAQ Clean Edge Green Energy Index Fund /zigman2/quotes/205893823/composite QCLN||10|
|SPDR S&P Semiconductor ETF /zigman2/quotes/204438110/composite XSD||9.2|
|Invesco Dynamic Semiconductors ETF /zigman2/quotes/209181828/composite PSI||8|
|Source: FactSet, through Wednesday, Nov. 3, excluding ETNs and leveraged products . Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greate r|
…and the bad
|Top 5 decliners of the past week||%Performance|
|VanEck Junior Gold Miners ETF /zigman2/quotes/204075079/composite GDXJ||-4.8|
|VanEck Gold Miners ETF /zigman2/quotes/206399889/composite GDX||-4.7|
|iShares MSCI Brazil ETF /zigman2/quotes/208893627/composite EWZ||-4.3|
|Global X Silver Miners ETF /zigman2/quotes/207060602/composite SIL||-4.3|
|ETFMG Prime Junior Silver Miners ETF /zigman2/quotes/207797470/composite SILJ||-4.2|
TIPS win in bond ETFs
Equities led inflows into U.S. ETFs in October, but within fixed-income, TIPS funds came out ahead in capturing capital from investors, according to State Street. The firm’s report shows that investors added a record $6 billion to Treasury-inflation-protected-securities ETFs in October.
That was surprising as “financial advisors were all on the TIPS story in May,” said Dave Nadig, director of research at ETF Trends , in a phone interview. “Most financial advisors figured out what their inflation positioning was throughout the summer” and earlier this fall.
“There’s an old saying in the TIPS market that ‘by the time you’ve bought TIPS, it’s too late,’” said Nadig. “Anybody who is just waking up to the idea,” he said, “is very late to the party.”
State Street’s Bartolini cautioned that TIPS, like nominal Treasuries, are bonds with “duration risk,” meaning changes in interest rates still “drive performance.” Using a cash position to buy TIPS to hedge against inflation is “opening your portfolio up to duration risk,” which is different from a relative value trade involving the sale of nominal Treasury exposure in favor of TIPS, he said.
“If say, a year ago your investment thesis was to not own U.S. Treasuries, and instead own TIPS,” said Bartolini, that “would have been a very profitable trade.”
The Federal Reserve said Wednesday that it will begin tapering its monthly purchases of Treasuries and mortgage-backed securities — an emergency program that it began last year after the pandemic wreaked havoc in markets — but kept its benchmark interest rate near zero.