Market Rout’s Winning & Losing ETFs

Market Rout’s Winning & Losing ETFs

Financial markets see steepest correction since 2011; here are the funds benefiting and suffering.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

The new week in financial markets is starting out exactly how the last one ended, with risk-asset prices plunging across the board.

At one point today, U.S. stocks were down by more than 7 percent. They've since pared their losses to about 4 percent, but the indexes remain far below where they were just a week ago.

The market rout, which started Tuesday, Aug. 18, picked up steam on Thursday and Friday, sending U.S. stocks toward correction territory for the first time since 2011.

The epicenter of global worries is of course China. First starting with the stock market crash that began in June, worries about the world's second-largest economy accelerated on Aug. 11, after the country devalued its currency by the most since 1994.

That move sparked a host of fears about whether China is slowing more than expected and whether emerging markets in general are headed for a 1997-style Asian financial crisis.

It remains to be seen what happens with China's economy and the repercussions for the rest of the world. For now, investors are taking no chances as they rush out of riskier assets and into the proverbial safe havens of the market. Here are the biggest losers and beneficiaries of the market crash.

Loser: United States Oil Fund (USO | B-100)

The seemingly never-ending downtrend in crude oil continued today as prices collapsed to a fresh six-year low of $37.75. That's taken a bite out of the United States Oil Fund (USO), which is down 9.5 percent since Aug. 18, and 37.4 percent since the start of the year.

The crude market, which is already swamped with supply, would be in even worse shape if emerging market demand slows from here. Indeed, demand was supposed to be a bright spot this year, with the International Energy Agency forecasting for 2015 the fastest oil demand growth in five years. That could now be in jeopardy.

Loser: SPDR S&P Oil & Gas Exploration & Production ETF (XOP | A-57)

Moving down in tandem with crude, energy stocks have been the hardest-hit equity sector within the U.S. market. Profits for the year are on track to more than halve from 2014, and many smaller energy producers may face bankruptcy if commodity prices don't recover soon.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which is one of the most popular funds covering the sector, has fallen 13.1 percent since Aug. 18, and 27.5 percent year-to-date.

Winner: iShares 20+ Year Treasury Bond ETF (TLT | A-85)

One of the few winners amid the market tumult, the U.S. Treasury bond market is the ultimate safe haven. The iShares 20+ Year Treasury Bond ETF (TLT), which focuses on the long end of the Treasury curve, has been a price beneficiary of recent bond buying, rising 1.9 percent since Aug. 18, and 2.5 percent for 2015 so far as a whole.

Loser: Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS | F-68)

As ground zero for the market's current woes, it's unsurprising that China-related ETFs have taken a beating. The Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS), which tracks the volatile small-cap segment of the country's mainland market, has been walloped to the tune of 30 percent since Aug. 18, but is still up 6.7 percent year-to-date.

If China's stock market continues to crash, naturally, ASHS will follow suit, as it tracks the market lower.

Winner: iPath S&P 500 VIX Short-Term Futures ETN (VXX | B-62)

The biggest gainers by far since the market correction began are VIX ETNs such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX). The exchange-traded note, which tracks the CBOE Volatility Index, is up a whopping 54 percent since this correction began, but is still down 22 percent on a year-to-date basis.

The VIX, or Volatility Index, is widely considered one of the best gauges of fear in the market.

Loser: iShares Russell 2000 (IWM | A-89)

Within the beaten-down U.S. market, small-cap stocks have been some of the worst hit during this market correction. The biggest, most liquid small-cap ETF, the iShares Russell 200 (IWM), is down 13 percent from its all-time highs. That compares with 10 percent for the SPDR S&P 500 (SPY | A-99) and 12.2 percent for the SPDR Dow Jones Industrial Average Trust (DIA | A-83).

On a year-to-date basis, IWM is down 6 percent; SPY is down 5.9 percent; and DIA is down 8.8 percent.

Winner: SPDR Gold Trust (GLD | A-100)

Gold made headlines earlier this year when it hit five-year lows. But the yellow metal has made a comeback, rising almost $100 from those lows, near $1,072. The SPDR Gold Trust (GLD), which tracks prices of physical gold, has followed suit to the upside. GLD is up 3.8 percent since Aug. 18, and down 2.1 percent year-to-date.

Loser: Vanguard FTSE Emerging Markets ETF (VWO | B-89)

While China has dominated the headlines, it's not the only emerging market feeling the pain recently. From Brazil to Russia to South Africa to Turkey, much of the developing world has been gripped by economic troubles. stemming from weak growth, plunging commodity prices, political crises and in some cases, high inflation and interest rates.

Most economists believe that these countries are in better fiscal shape than they were in the ’90s during the last emerging market crisis, but that hasn't stopped investors from fleeing the Vanguard FTSE Emerging Markets ETF (VWO). The ETF is down 11.8 percent since last Tuesday, and 18.8 percent since the start of the year.


Contact Sumit Roy at [email protected].

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.