The month of February has been fraught with huge volatility, with the S&P 500 and Dow Jones slipping into correction territory while the Nasdaq Composite Index falling into a bear market. The escalation in tensions between Moscow and the western countries over Ukraine coupled with the Fed rate hike bets led to a steep sell-off in the market (read: 5 Inverse ETFs to Tap Worsening Russia-Ukraine Tension).
The tensions have led to supply disruption fears in an already-tight commodity market. As Russia is a commodities powerhouse and a key supplier of energy, metals and agri, the worsened relations have sparked a rally in a broad range of commodities, thereby benfiting the commodity producers the most. As such, SPDR S&P Metals & Mining ETF XME, SonicShares Global Shipping ETF BOAT, VanEck Steel ETF SLX, US Global GO GOLD and Precious Metal Miners ETF GOAU and First Trust Natural Gas ETF FCG have gained in double-digits in February.
Russia-Ukraine Tension Turns Bitter
The tension between the two countries has escalated following the launch of attack by Russia on Ukraine, and a number of Western countries increased sanctions against Russia.
U.S. President Joe Biden announced severe new sanctions against Russian banks and state-owned enterprises on Feb 24 in response to its full-scale invasion of Ukraine. Biden also announced measures to impede Russia's ability to do business in the world's major currencies, along with sanctions. Meanwhile, the European Union decided to retaliate and plans to slap sanctions on Russia’s defense minister, a top adviser to president Vladimir Putin and hundreds of Russian lawmakers, who voted in favor of recognizing the independence of separatist areas in southeast Ukraine.
The United Kingdom also announced the largest-ever set of sanctions against Russia, including freezing the assets of all major Russian banks and banning hi-tech exports. Germany halted the approval of a major gas pipeline project, Nord Stream 2, in Russia that would have deepened western Europe's energy link to Russia, the world's largest natural gas exporter.
In a recent development, Western nations announced a harsh set of sanctions to punish Russia for its invasion of Ukraine, including blocking some banks from the SWIFT international payments system. New measures announced by the United States, Britain, Europe and Canada also include restrictions on the Russian central bank's international reserves. The sanctions will be implemented in the coming days (read: 5 Low-Beta ETFs to Buy Amid Market Volatility).
Fed Rate Hike Bets
The possible aggressive tightening by the Federal Reserve has been weighing on the stock market since the start of the year. The Fed is planning to raise interest rates for the first time since 2018 to combat the 40-year high inflation.
We have highlighted the ETFs in detail below:
SPDR S&P Metals & Mining ETF (XME) – Up 21.3%
SPDR S&P Metals & Mining ETF offers a broad exposure to the U.S. metal and mining industry by tracking the S&P Metals and Mining Select Industry. It holds 32 stocks in its basket with steel firms accounting for 39.8% of the portfolio while coal & consumable fuels, aluminum and gold round off the next two spots with double-digit exposure each.
SPDR S&P Metals & Mining ETF has 0.32% in expense ratio and has AUM of $2.5 billion. It trades in an average daily volume around 5 million shares.
SonicShares Global Shipping ETF (BOAT) – Up 19.3%
SonicShares Global Shipping ETF provides pure-play exposure to the global maritime shipping industry by tracking the Solactive Global Shipping Index. The index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas.
SonicShares Global Shipping ETF holds 50 stocks in its basket and has amassed $23.7 million in its asset base since its inception in August. The fund charges 69 bps in annual fees and trades in an average daily volume of 24,000 shares.
VanEck Vectors Steel ETF (SLX) – Up 12.9%
VanEck Vectors Steel ETF provides a pure-play exposure to a small basket of 25 stocks in the steel sector. It tracks the NYSE Arca Steel Index. American firms dominate the fund’s returns at 36.8%, followed by Brazil (25.3%) and Australia (15.9%).
VanEck Vectors Steel ETF has amassed $108.1 million in its asset base and charges 56 bps in fees from investors. It trades in a moderate volume of 55,000 shares a day on average (read: Russia-Ukraine Crisis Spark Rally in Commodity ETFs).
US Global GO GOLD and Precious Metal Miners ETF (GOAU) – Up 12.1%
US Global GO GOLD and Precious Metal Miners ETF provides investors with access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It tracks the U.S. Global Go Gold and Precious Metal Miners Index, holding 28 stocks in its basket. Canada takes the lion’s share at 57.1%, followed by South Africa (14.7%), United States (12.6%) and Australia (10.8%).
US Global GO GOLD and Precious Metal Miners ETF has amassed $102.9 million in its asset base and charges 60 bps in fees per year.
First Trust Natural Gas ETF (FCG) – Up 12%
First Trust ISE-Revere Natural Gas Index Fund offers exposure to U.S. companies involved in the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 43 stocks in its basket (read: Oil Rallies Amid Russia-Ukraine Crisis: ETFs to Bet on).
First Trust ISE-Revere Natural Gas Index Fund has amassed $516.1 million in its asset base while charging 60 bps in annual fees. Volume is good, with 1.7 million shares exchanged per day, on average. The product has a Zacks ETF Rank #3 (Hold).
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VanEck Steel ETF (SLX): ETF Research Reports
SPDR S&P Metals & Mining ETF (XME): ETF Research Reports
First Trust Natural Gas ETF (FCG): ETF Research Reports
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
SonicShares Global Shipping ETF (BOAT): ETF Research Reports
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