Other EM Laggards
Pakistan isn’t the only emerging market country performing badly in 2019. Though the iShares Core MSCI Emerging Markets ETF (IEMG) is up 8.7% on the year, the VanEck Vectors India Small-Cap Index ETF (SCIF), the Global X MSCI Nigeria ETF (NGE) and the First Trust South Korea AlphaDEX Fund (FKO) are all lagging.
Korean stocks, in particular, got hit recently after Japan escalated a trade rift between the two countries.
Along with emerging markets, a few commodity ETFs also made an appearance on the worst performers list. The United States Natural Gas Fund KP (UNG), the Breakwave Dry Bulk Shipping ETF (BDRY), the Teucrium Wheat Fund (WEAT) and the Global X Lithium & Battery Tech ETF (LIT) all sagged on a year-to-date basis.
Natural gas prices are at a three-year low as the inexorable rise in U.S. energy production continues, and demand, while also increasing, just can’t keep up.
When Trend Following Goes Wrong
Finally, rounding out the worst performers list are two trend-following ETFs, the Pacer Trendpilot U.S. Mid Cap ETF (PTMC) and the VictoryShares U.S. Discovery Enhanced Volatility Wtd ETF (CSF).
The two funds provide exposure to U.S. midcap and small cap stocks, respectively, but occasionally shift to cash positions when markets begin to trend lower. This toggling between stocks and cash ideally limits downside when markets are dropping, while preserving upside when they are rising.
But since the market top last October, the two ETFs got hit by the market sell-off, without benefiting from the rally that followed.
That is the peril of mechanical, trend-following strategies.