By Mark DeCambre
Hello there! Got volatility? We bet you do as the Federal Reserve signaled on Wednesday that interest rate increases in 2022 are its main priority. There is nothing new there, as investors had expected as many as four rate hikes this year, but the message is being fine-tuned. Fed boss Jerome Powell wanted to emphasize that policy is tightening but it isn’t on a preset course, to borrow phrasing from current Treasury Secretary Janet Yellen, a former Fed chief, which could be interpreted a number of ways. Inflation could get worse and the Fed might need to adjust policy or price pressures might recede in due time.
Is the Fed behind the curve? Is it too hawkish? Those are all questions that might take time to play out, but the key thing for investors to suss out is how and where they should be positioned. And we’ve got some reads on that to share.
Read: What is an ETF? We’ll explain.
|Top 5 gainers of the past week||%Performanc e|
|VanEck Oil Services ETF /zigman2/quotes/207596637/composite OIH||3.6|
|KraneShares Global Carbon Strategy ETF /zigman2/quotes/219806069/composite KRBN||2.7|
|iShares MSCI Hong Kong ETF /zigman2/quotes/200903343/composite EWH||1.8|
|iShares MSCI Brazil ETF /zigman2/quotes/208893627/composite EWZ||1.7|
|Energy Select Sector SPDR Fund /zigman2/quotes/206420077/composite XLE||1.6|
|Source: FactSet, through Wednesday, Jan. 26, 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|
|Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK||-9.7|
|AdvisorShares Pure US Cannabis ETF /zigman2/quotes/220307682/composite MSOS||-9.4|
|NorthShore Global Uranium Mining ETF /zigman2/quotes/215396693/composite URNM||-8.7|
|ARK Next Generation Internet ETF /zigman2/quotes/201846852/composite ARKW||-8.5|
|First Trust Nasdaq Clean Edge Green Index Fund /zigman2/quotes/205893823/composite QCLN||-8.4|
Visual of the week
Wednesday’s post-Federal Reserve decision action was notably bad for these ETFs, according to Instinet’s Frank Cappelleri: “While some of the ETFs and indices we track logged noticeably bad one-day declines, the intra-day sell-offs tell the full story. 22 dropped more than 4% from their highs” on Wednesday, he wrote.
Some strategists have been pointing to the benefits of venturing outside of the U.S. for returns during this fallow period in domestic assets and the performance of international ETFs point to areas that are, indeed, outperforming handily so far in 2022.
That includes the country-specific iShares MSCI Chile ETF /zigman2/quotes/205935893/composite ECH +2.54% , which is up 10.5% in the year to date, ahead of the Global X MSCI Colombia ETF /zigman2/quotes/201129531/composite GXG +0.92% , up 10.3%, while the iShares MSCI Brazil ETF /zigman2/quotes/208893627/composite EWZ +0.62% is up nearly 10%. Latin America broadly, via the iShares Latin America 40 ETF /zigman2/quotes/204501189/composite ILF +1.48% , is up 7.1%, and the Greek fund, the Global X MSCI Greece ETF /zigman2/quotes/208159440/composite GREK +0.04% has gained 4.3% so far in January (see attached table):
Meanwhile, the SPDR S&P 500 ETF Trust /zigman2/quotes/209901640/composite SPY +2.45% is near the back of the pack, down 8.75% year to date.
Where to buy?
We caught up with Zoe Barry, who founded nascent trading platform Zingeroo, and she had some interested insights about younger investors. Zingeroo, is a growing trading platform that caters to investors in their 20s and 30s, but also has a range of users, and allows traders to benchmark their performance, not against the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.47% or the Russell 2000 /zigman2/quotes/210598147/delayed RUT +2.70% but against one another.
Barry says that younger investors aren’t panicking amid this market downtrend and note that investors had been loading up on ETFs that are short big technology stocks, which they rightly believed would suffer as bond yields rose, putting pressure on interest rate-sensitive areas of the market.
She said two of the more popular trades were ProShares UltraPro Short QQQ, which is up 46.4% so far this year, compared with the Invesco QQQ Trust, which is down 12.8% so far in 2022.