ETFs Moving The Most On Coronavirus Fears

February 24, 2020

Financial markets are exploding with volatility today after the number of worldwide coronavirus cases balloons. Globally, there have now been nearly 80,000 people infected with the virus and more than 2,600 deaths.

While most of the cases had originally been occurring in China, a surge of new cases has popped up in South Korea, Italy and Japan, fueling pandemic fears.

While the World Health Organization has yet to declare the virus a pandemic, investors are increasingly concerned that the situation could spiral out of control, damaging economic growth severely.

Here are some of the ETFs moving the most on the latest developments:

Equities

  • The U.S.

U.S. stocks were hammered on Monday as the SPDR S&P 500 ETF Trust (SPY) fell as much as 3.3%, its biggest single-session decline since 2018. After the move, the S&P 500 is now flat for the year after having been up more than 5% year-to-date as recently as last Wednesday.

The U.S. has so far been spared from the worst of the coronavirus, but there are 53 confirmed cases in the country, according to the Centers for Disease Control and Prevention. Only 14 of those cases were developed in the country; the others were from citizens repatriated to the U.S. from China and the Diamond Princess cruise ship.

The S&P 500 Erases Its Year-To-Date Gains…

  • China

The epicenter of the novel virus, China hasn’t performed nearly as poorly as one may have expected it to. The country faces mass quarantines, shuttered factories and an economy at a standstill, yet the iShares MSCI China ETF (MCHI) is down 3.4% today, in-line with U.S. stocks. Year-to-date, the ETF is down 3%, but it’s well within its recent trading ranges.

Perhaps there has been some support for markets coming from the Chinese government. Or perhaps investors are just being optimistic.

China ETF Still In Its Trading Range…

  • South Korea and Italy

Outside of China, South Korea and Italy have seen the largest number of coronavirus cases—833 and 223, respectively. Unsurprisingly, both countries are in panic mode, and that is reflected in their stocks.

The iShares MSCI South Korea ETF (EWY) and the iShares MSCI Italy ETF (EWI) each dropped about 5% on Monday. EWY is down 10.8% year-to-date, while EWI is down a more modest 4.5%.

Safe Havens

  • Treasuries

Seeking shelter from the storm, investors have wholeheartedly embraced Treasuries. The rally in the 30-year Treasury just won’t quit as the yield on the bond touched a fresh record low on Monday at 1.81%. The 10-year Treasury yield wasn’t far behind; it fell to a low of 1.35%, only a few basis points from the record-low 1.318% set in 2016.

With yields tumbling and bond prices spiking, Treasury ETFs rallied hard on Monday, led by long-duration funds. The iShares 20+ Year Treasury Bond ETF (TLT) gained 1.9%, bringing its year-to-date return to an impressive 11.5%.

The broader iShares Core U.S. Aggregate Bond ETF (AGG) rose by 0.4% on Monday and 2.9% on a year-to-date basis.

30-Year Treasury Yield Touches Record Lows…

  • Gold

If there were any questions left about whether gold is still considered a safe-haven by investors, Monday’s price action put that to bed. The yellow metal climbed for a fifth-straight session, adding 1.8% to its value.

Prices for gold topped $1,689/oz for the first time in seven years as investors treated the metal like an alternative to Treasuries. The SPDR Gold Trust (GLD) is up 10.2% year-to-date, similar to long-dated Treasury ETFs.

Gold Prices At 7-Year Highs…

Volatility

  • VIX

It’s been a while since investors have seen the Cboe Volatility Index (VIX) trade so high. The index, which measures the implied volatility of near-term options on the S&P 500 and is considered Wall Street’s "fear gauge," got as high as 24.89 on Monday. The last time the VIX printed above 20 was in October. The last time it was this high was about 14 months ago, when stocks were bouncing back from the 20% drubbing they took in late 2018.

Suffice it to say, investors are nervous, and that’s showing up in all the hedging they are doing with options. It’s also showing up in VIX-tracking ETFs, like the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX), which surged 16% on Monday.

The VelocityShares Daily 2x VIX Short-Term ETN (TVIX), which offers leveraged exposure to the same index, jumped 32% in the session.

The VIX Tops 20…

Commodities

  • Oil

Crude oil prices threatened to break below $50/barrel on Monday as traders priced in the potential for a steep global economic slowdown. WTI crude oil prices are grappling with the largest deceleration in oil demand growth since the financial crisis, and there seems to be little appetite from the Russia-OPEC cartel to cut production to prop up prices.

The United States Oil Fund (USO) followed oil prices down on Monday, shedding 5%. The fund is down 17.2% year-to-date.

Oil Struggles To Hold $50…

Email Sumit Roy at [email protected] or follow him on Twitter @sumitroy2

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