A look at the losers.
The stock market has been volatile, with the Dow Jones industrial average stringing together eight straight losses in June on continued fears about a global trade war. However, it’s worth noting the S&P 500 index is still up slightly since Jan. 1. It’s important for investors to remember that the S&P 500 is just an average of the largest U.S. stocks. It’s a great big world, and there are many other flavors of investments that are doing significantly better — or significantly worse. These 10 exchange-traded funds highlight the big losers that make the volatility in the S&P look like a picnic.
iShares MSCI South Africa ETF (ticker: EZA)
Currently down about 18 percent on the year, the EZA has fallen steadily since March. Some profit-taking was natural as this exchange-traded fund saw a huge run from lows of around $50 at the onset of 2017 to highs topping $75 a few months ago. “Frontier markets” like Africa are prone to tremendous volatility by their nature. Secondly, the fund is incredibly dependent on telecom provider Naspers Limited, with more than 22 percent of assets in this one stock. Naspers has cooled off lately amid some big asset sales, and that has held back EZA in a big way, too.
iShares MSCI Philippines ETF (EPHE)
Another region that has been hit hard in 2018 is the Philippines. There are similar economic headwinds as with South Africa, because while the Philippines has been one of the fastest-growing economies in Asia it is also seeing a slowdown after previous expansion. It’s also worth remembering that its president, Rodrigo Duterte, is a strongman who has even used the word “dictator” to refer to his leadership, and that political uncertainty in the region remains high. The fund is down about 25 percent from its highs to start 2018.
Global X MSCI Argentina ETF (ARGT)
Argentina differs from the previous two regions largely because its economy isn’t coming off a hot run. Saddled with huge government debt and anemic growth prospects, the South American nation has struggled mightily. ARGT benefited from optimism in 2017 that the worst was over, however, with this ETF running up from roughly $25 a share to almost $40. Unfortunately, it seemed that enthusiasm wasn’t meant to last as talk of a global trade war weighs on emerging markets and tighter monetary policies abroad make it harder for Argentina to attract capital. Shares of this ETF are off about 25 percent this year.
Teucrium Sugar Fund (CANE)
This isn’t just a story of individual countries, however. One specific asset class that has been troubled in 2018 is sugar, thanks to a global oversupply for the second year in a row. This has been sweet for companies that rely on sugar as a raw material, but bitter for sugar prices and related commodity investments. At the beginning of 2017, sugar prices were at 21 cents per pound and are now around 12 cents a pound. CANE is a direct play on sugar, and has slumped almost 25 percent in the last six months.
iPath S&P 500 Dynamic VIX ETN (XVZ)
Another dramatic market trend is the return of volatility, which is good for certain kinds of traders, but bad for funds like the XVZ that bet against that trend. Specifically, the Dynamic VIX ETF uses a portion of its portfolio to bet against the CBOE Volatility Index, known by its ticker the VIX or colloquially as the “fear index.” That share is dynamic and can change based on market conditions and the cost of “rolling over” the VIX futures it holds as they expire. Unfortunately, even a dynamic approach to the VIX hasn’t been a profitable one. This product is down over 17 percent year-to-date.
VanEck Vectors Rare Earth/Strategic Metals ETF (REMX)
This quirky ETF invests in a small list of companies that produce, refine or recycle “rare earth” elements. This special class of metals, including hard-to-pronounce materials like yttrium and neodymium, are hard to come by but crucial in specialized applications. The promise some investors see in rare earths is demand is strong and supply is weak, so pricing should be great. However, the industry never lived up to the hype since production has been strong enough to keep pricing relatively low and limit profitability. The relative lack of scarcity is weighing on related companies. REMX is off about 25 percent year-to-date.
First Trust Brazil AlphaDEX Fund Equity (FBZ)
The FBZ fund is a hyper-focused ETF with a more targeted selection process that includes screening companies for growth metrics and value factors instead of a passive large-cap index. This can result in much better performance if you invest in the right assets of the moment but can really cause pain if your money is in the wrong place. Unfortunately for FBZ investors, it has been a lot of the latter thanks to a huge corruption scandal that began in 2014. And while Brazil has struggled mightily to get on the right path, it has been slow going. FBZ has a year-to-date loss of nearly 30 percent.
Columbia India Small Cap Fund Equity (SCIN)
Another region that holds big promise but has been in a rough spot lately is India. The nation was seen to be on a path to economic reform and modernization after the election of the dynamic Narenra Modi as prime minister about four years ago. Markets have recently cooled off after stock market valuations in the region ran up a bit too fast. That’s not to say that India is in trouble, as its GDP growth rate is running around 7 percent. However, valuations do matter and investors have been reluctant to keep bidding up stocks. This ETF is slumping about 30 percent year-to-date.
iShares MSCI Turkey ETF (TUR)
Turkey is another nation in relatively dire straits compared with the West. Its fundamental problem stems from inflation that has at times topped a double-digit rate, hurting businesses and consumers with higher prices and central bank moves. Specifically, the Central Bank of the Republic of Turkey has been tightening aggressively, including a rate increase of 3 percent in May. Such moves slow the flow of money, and can weigh on economic growth. And with investors expecting continued aggressive rate hikes in the near future, it’s hard to have confidence in TUR or its component stocks. The fund is down roughly 30 percent this year.
iShares MSCI Poland ETF (EPOL)
It may be surprising to see Eastern European mainstay Poland make the loser ETF list. This member of the European Union is one of the bright spots in the economic zone with GDP growth just shy of 3 percent lately. However, a massive weighting toward financials has become a problem for the fund as Brexit woes and the interest rate environment hamper banks. With more than 30 percent of its portfolio in three Polish banks, and more than 45 percent of the fund in this sector as a whole, growth in other sectors can’t offset these headwinds. As a result, EPOL is down more than 20 percent.
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