Finally, the "strong stretch" of the U.S. stock market has started. Traditionally, the three months from November through January mark the most successful run of the stock market. A consensus carried out from 1950 to 2013 showed that November ended up offering positive returns in 42 years and negative returns in 22 years, per moneychimp.com (read: ETFs and Stocks to Buy in November for Sweet Returns ).
This year was no exception either with the strong rally initiated in the second half of the year continuing in November as investors completely ignored concerns over lower commodity prices and macroeconomic weakness. Both the major U.S. benchmarks - Dow Jones and the S&P 500 - hovered around all-time highs.
The S&P 500 returned nearly 4.3% while the DJIA generated even more at 6%, thanks to the still-low interest rate policies, a recovering job market and increasing consumer confidence. Investors should note that a couple of equity funds were clearly the biggest beneficiaries of the positive trends in November while some succumbed to losses. Let's take a look at the three best and worst performing ETFs of the month.
Spectrum U.S. ETN (EEH) - Up 25.94%
Given an uptrend in the U.S. market and volatility in foreign economies, investors are zeroing on large cap stocks, which tend to be the most stable in an adverse economic scenario while at the same time offer capital appreciation in a booming market. Though this ETN is unpopular and illiquid with $2.3 million in AUM and average daily volume of 7,000 shares, it emerged as a winner last month (see: all the Large Cap ETFs here ).
The fund looks to track the Spectrum Large Cap U.S. Sector Momentum Index. The unique momentum strategy seeks to increase exposure to the sub-indices that outperform the S&P 500 and lessen allocations for the underperformers. The note comes with a cash payment at scheduled maturity or early redemption based on the performance of the underlying index. The ETN charges 75 bps in fees per year.
WisdomTree Japan Hedged Capital Goods Fund (DXJC) - Up 18.17%
Japan investing ruled the month thanks to the announcement of a stepped-up monetary stimulus. Notably, the Japanese economy presently is in a technical recession, having posted negative GDP growth in two back-to-back quarters.
In a bid to fight weakening growth and boost consumer prices, Japan's central bank announced on October 31 that it would enhance its asset buying program to 80 trillion yen a year from the previous rate of 60-70 trillion yen. This boosted Japanese stocks and devalued the Japanese currency. The capital goods sector benefitted strongly due to the 5.5% year-on-year expansion in capex in Q3.
The fund is an overlooked choice with $1.5 million in assets and 4000 shares of average trading volume a day. The fund charges 43 bps in fees (read: WisdomTree Debuts 5 Hedged Japan Sector ETFs ).
db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) - Up 17.21%
China was also in focus last month having announced a surprise rate cut after more than two years. The central bank slashed the one-year lending rate by 40 bps to 5.6% and the deposit rate by 25 bps to 2.75%. This gave an expected boost to all Chinese stocks and ETFs. Among them, ASHR was the one to deliver the highest return (read: China ETFs in Focus on Surprise Rate Cut ).
ASHR tracks the CSI 300 Index. The fund is relatively popular and liquid in the China A-shares market with AUM of $612 million and average daily volume of around 650,000 shares. However, the fund charges 82 bps in fees.
iPath Pure Beta Energy ETN (ONG) - Down 20.25%
The note was hit the most due to the oil slide. The product looks to track the Barclays Commodity Index Energy Pure Beta Total Return and provides exposure mainly to the oil market and to some extent to the natural gas market.
With falling demand and increased output globally, energy ETFs suffered heavily in the recent months. Per Bloomberg , the latest oil crash seems to be the most awful in six years. A seven -year high price of the greenback also weighed upon this liquid commodity. ONC trades in paltry assets of 1.9 million. The product charges 75 bps in fees.
C-Tracks on Citi Volatility Index ETN (CVOL) - Down 19.83%
As the stock market indices kept hitting multi-year highs in November, quite understandably, volatility levels eased in the market. As a result, CVOL had to pay the price of the astounding ride of the stock market.
The note provides investors direct exposure to the implied volatility of large-cap U.S. stocks. The benchmark combines a daily rolling long exposure to the third and fourth month futures contracts on the VIX with short exposure to the S&P 500 Total Return Index.
The product has amassed $6.8 million in its asset base and charges 1.15% in annual fees. Average daily volume is moderate as it exchanges 130,000 shares in hand.
iPath S&P GSCI Crude Oil Index ETN ( OIL ) - Down 19.75%
Again, an oil ETF takes the third place in the list of losers. This is an ETN option and delivers returns through an unleveraged investment in the West Texas Intermediate (WTI) crude oil futures contract. The product follows the S&P GSCI Crude Oil Total Return Index, a subset of the S&P GSCI Commodity Index (read: High Output and Weak Demand Hitting Oil ETFs ).
The note has amassed $230.4 million in its asset base and has a good volume of roughly 400,000 shares a day. It charges 75 bps in fees per year from investors.
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