Wall Street has delivered a muted performance in May while debt-deal was on. The S&P 500 (up 0.9%), the Dow Jones (down 2.9%), the Nasdaq (up 6.1%) and the Russell 2000 (up 0.2%) have swung in the range of negative 2.9% to up 6.1% (as of May 26, 2023). Only, the Nasdaq has recorded the fifth straight week of gains, helped by an AI-powered tech rally.
Notably, Information Technology takes about 27.64% of the S&P 500 while the sector occupies about 60% of the Nasdaq-100. Hence, a tech rally has been instrumental in driving the markets in May. Let’s find out a few winning and losing ETFs of the month.
Esoterica Nextg Economy ETF WUGI – Up 23.1%
The AXS Esoterica NextG Economy ETF is an actively managed ETF that invests in stocks of companies which benefit from the ever-evolving digital economy. Nvidia NVDA cheered investors with its solid first-quarter fiscal 2024 results, wherein it topped both earnings and revenue estimates buoyed by the strength of its data center business. It also offered a bullish revenue outlook for the current quarter on booming artificial intelligence (AI) demand for its high-powered chips. Nvidia occupies about 14% of the fund and thus gained immensely in the month.
Vaneck Semiconductor ETF SMH – Up 22.4%
This is yet another beneficiary of the Nvidia-driven rally in the month. The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund has a Zacks Rank #2 (Buy) (read: ETFs to Buy on Nvidia's Blowout Q1 Earnings).
Microsectors Fang+ ETN FNGS – Up 21.6%
The big-tech or FANG+ corner of the broad technology sector has been an area to watch lately, given the return of the appeal for the tech stocks. The combination of easing inflation, upbeat corporate earnings, the regional bank crisis and the adoption of new-era technologies is driving the tech sector higher. A likely pause in interest rate increases could be a positive sign for technology stocks. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
Breakwave Dry Bulk Shipping ETF (BDRY) – Down 25.5%
The Baltic Exchange's main sea freight index, which measures the global cost of shipping goods, recorded its 12th successive decline on Friday, May 26, its lowest level since Mar 2. The capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, slipped considerably. Also, the panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tons, reported its 23rd successive daily decline,per tradingeconomics.
Simplify Tail Risk Strategy ETF (CYA) – Down 20%
The Simplify Tail Risk Strategy ETF seeks to provide investors with a standalone solution for hedging diversified portfolios against severe equity market selloffs. With the broader market remaining more-or-less steady, this fund underperformed in May.
Global X MSCI China Real Estate ETF CHIR – Down 13.8%
China's housing market sales is retreating after a short-lived recovery, highlighting the challenges the world's second-largest economy is facing in the real estate space. To boost sales, the debt-laden real estate developers are slashing prices, but the Chinese government is penalizing those who are announcing steep cuts for fear of it troubling the market and adding to the crisis for banks. In any case, many believe that China’s recovery has been feeble post-reopening this year.
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