In many ways, the second quarter of the year saw a continuation—as well as some reversals—of some trends we saw in the first quarter.
The equity market has continued its rally, with several indices notching record highs. However, the steady uptrend seen in broad equity markets has hidden the rotations happening beneath the surface.
In a change from the first quarter of the year, the iShares Russell 1000 Growth ETF (IWF) outperformed the iShares Russell 1000 Value ETF (IWD) by nearly 7% during the second quarter. This outperformance brought their year-to-date returns within 4% of each after returns had diverged in mid-February. At one point in mid-May, value had been outperforming growth by over 14%.
Oil- and energy-related stocks continued their uptrend that began in late October of last year. The Energy Select Sector SPDR Fund (XLE) is up 45% through the end of the second quarter, compared to just over 15% for the SPDR S&P 500 ETF Trust (SPY). Economies reopening around the world have increased demand, helping to boost oil prices to multiyear highs.
Charts courtesy of StockCharts.com
Best-Performing ETFs Of 2021 (Ex. Leveraged/Inverse)
|BDRY||Breakwave Dry Bulk Shipping ETF||281.17%|
|FCG||First Trust Natural Gas ETF||86.92%|
|PSCE||Invesco S&P SmallCap Energy ETF||83.08%|
|PXE||Invesco Dynamic Energy Exploration & Production ETF||82.39%|
|GRN||iPath Series B Carbon ETN||76.13%|
|PXI||Invesco DWA Energy Momentum ETF||74.17%|
|FRAK||VanEck Vectors Unconventional Oil & Gas ETF||74.00%|
|JJT||iPath Series B Bloomberg Tin Subindex Total Return ETN||72.39%|
|XOP||SPDR S&P Oil & Gas Exploration & Production ETF||66.61%|
|AMZA||InfraCap MLP ETF||65.39%|
|MLPO||Credit Suisse S&P MLP Index ETN||63.06%|
|IEO||iShares U.S. Oil & Gas Exploration & Production ETF||61.13%|
|FTXN||First Trust Nasdaq Oil & Gas ETF||57.84%|
|DBO||Invesco DB Oil Fund||52.91%|
|OIL||iPath Pure Beta Crude Oil ETN||52.44%|
|FUE||ELEMENTS Linked to the ICE BofAML Commodity Index eXtra Biofuels - Total Return ETN||51.95%|
|XRT||SPDR S&P Retail ETF||51.62%|
|USO||United States Oil Fund LP||51.11%|
|OILK||ProShares K-1 Free Crude Oil Strategy ETF||50.65%|
|KRBN||KraneShares Global Carbon ETF||50.18%|
Data measures total returns for the year-to-date period through June 30, 2021.
Energy Continues Rocketing Higher
This spike in demand for oil helped energy-related ETFs dominate the list of best-performing ETFs, making up 14 of the top 20 names. This is a sharp reversal from last year, when many energy-related names were negative for 2020, a year that started off with a supply glut and ended with dried-up demand as the pandemic kept nonessential travel to a minimum.
The First Trust Natural Gas ETF (FCG) is up 86.9% for the year, after falling by 23.2% last year. The Invesco S&P SmallCap Energy ETF (PSCE) has seen a similar reversal. The fund fell by 40.3% last year, but is up 83.08% through the end of the second quarter.
Oil prices could continue to rise into the second half of the year. OPEC+ was forced to abandon talks this week after the United Arab Emirates had rejected a proposal to increase oil production by 400,000 barrels per day. The UAE wants to produce even more oil than the proposal would call for.
Two products to make the top-performing list fall under the ESG umbrella. The iPath Series B Carbon ETN (GRN) and the KraneShares Global Carbon ETF (KRBN) invest in the global carbon credit market and were up 76.1% and 50.2%, respectively.
Meme Stocks Boost Retail ETF
Meme stock mania has benefited some ETFs, including the SPDR S&P Retail ETF (XRT). Though its year-to-date return of 51.6% pales in comparison to GameStop’s astonishing 897.6% gain, the stock’s inclusion in the fund has helped it become one of the best-performing funds of the year so far.
Two more commodity ETFs made the top 20. The iPath Series B Bloomberg Tin Subindex Total Return ETN (JJT) tracks an index that provides exposure to tin by rolling into every other contract. The fund has gained 72.6% year-to-date.
The ELEMENTS Linked to the ICE BofAML Commodity Index eXtra Biofuels – Total Return ETN (FUE) has also had strong performance. This fund tracks an index of biofuel-related commodities weighted by their calorific potential, and was up 52.0% year-to-date.
Shipping ETF Remains Atop List
Coming in at the top of the list once again is the Breakwave Dry Bulk Shipping ETF (BDRY). This fund tracks an index of long-only exposure of dry bulk freight futures contracts, and is up 281.2% through the end of the second quarter.
Though the bulk of this fund’s return occurred in the first quarter, it rose 49.4% in the second quarter, as shipping rates remain elevated. According to the Wall Street Journal, the average price worldwide to ship a 40 foot container has risen over 50% since the first week of May, and more than quadrupled from a year ago.