The month of January was moderate for U.S stocks with the revitalized Trump rally in some sessions dulled by the U.S President's controversial economic polices over immigration and border tax and concerns in the retail sector due to weak holiday sales in departmental stores (read: Best and Worst ETFs to Start 2017 ).
However, some unexpected corners emerged as winners. Let's take a look at what was hot and what not in the first month of 2017. The figures are as per xtf.com .
Metals and mining stocks had a good start to 2017. Positive developments in the Chinese industrial sector - a mammoth consumer of global metals - and an overall pickup in global manufacturing activities made miners rule in January. The greenback was subdued in the month, which helped commodity prices to surge. Also, Trump's plans to boost infrastructure spending backed material and mining stocks.
Among the winners, Global X Uranium ETF URA added about 33.7% in the month asKazakhstan state company - the world's top uranium producer - announced plans to slash production by 10% this year. The move is intended to rebalance the uranium market that has been facing a supply glut since 2011 (read: What's Behind the Surge in Uranium ETF? ).
Global X Copper Miners ETF COPX advanced about 20.8%. Copper prices are rising on improving fundamentals in the Chinese economy as the country is the world's biggest consumer of this industrial metal, accounting for roughly 40% of global copper demand. Plus, readings of several big economies' manufacturing activities came in favorable in recent times, pushing up demand for copper, which has extensive industrial usage
PureFunds ISE Junior Silver ETF SILJ also has considerable usage in industrial activities and thus was in a beneficial position. SILJ was up 19.1% in the month. Global X China Materials ETF CHIM advanced about 19.8% in the month, thanks to the stabilization in the industrial sector and a recovery in the property market.
VanEck Vectors Junior Gold Miners ETF GDXJ recorded a gain of 16.5% in the monthas theunderlying metalscored the largest one-month advancement since June . It has been noticed that miners mostly act as leveraged plays of the underlying metal.
Brazil Back with a Bang
In view of cooling inflation (which has once been at the sky-high level) and soft economic growth, Brazil embarked on an aggressive policy easing cycle. On January 11, the central bank cut interest rate by 75 basis points to 13.00%, surpassing market expectations of a cut of 50 bps. This was followed by two back-to-back cuts of 25 basis-points each.
This boosted consumer confidence in Brazil as low rates provided some relief to the debt-ridden families. Most of the Brazil ETFs gained in the month. Small-cap ETF iShares MSCI Brazil Small-Cap EWZS led the way, gaining about 18.3% as smaller capitalization stocks better reflect the economy.
India ETFs Regain Shine
Many believe that Donald Trump 's fascination for India as "a natural balancer to China" and this is beneficial to the U.S." We note that India's market took a beating at the end of 2016 due to the demonetization issue. Now those products offer a compelling valuation. Columbia India Infrastructure Index Fund INXX and VanEck Vectors India Small-Cap Index ETF SCIF were up 13.1% and 11.6% in January, respectively (read: Are India ETFs Feeling the Pinch of the Cash Ban? ).
Natural Gas Evaporates
Trump's plans to impose a border tax of 20% on imports from Mexico, which may backfire. If the plan materializes, it will be a huge blow to the mutual dependence of the two countries. The U.S. last year exported about 127.4 billion cu ft of gas to Mexico on a monthly basis, nearly double of what it used to export two years ago.
This helped shale gas producers to survive the difficult time in the energy market. Now if Trump imposes border tax, the natural gas market will witness a glut and prices will fall. Also, Natural-gas futures climbed for five successive months through December , causing an overvaluation. So, Mexico concerns and a correction caused decline in natural gas market. iPath Dow Jones-UBS Natural Gas ETN GAZ and United States Natural Gas Fund UNG were down 21.7% and 13.3%, respectively.
People's reluctance toward brick-and-mortar retail stores as evident from weak holiday sales at retail behemoths like J.C. Penney (JCP), Macy's (M) and Kohl's (KSS) hurt retail ETFs. First Trust Nasdaq Retail ETF FTXD fell about 6.8% in the month (read: ETFs & Stocks to Roar Higher on Record Online Spending ).
Though there are indications of economic stabilization in Europe, political uncertainty regarding Brexit and impending elections in some countries kept the equity gains in the continent at check. The subdued gains in the currency hedged Europe ETFs were further hurt by a weaker greenback. JPMorgan Diversified Return Europe Currency Hedged ETF JPEH thus lost about 6.1%.
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