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4 Underperforming ETFs
During the month of April, the SPDR S&P 500 ETF (NYSE: SPY), designed to track the performance of the S&P 500, rose about 10%. However, some asset classes did not participate in this broad rally. Four ETFs that lagged in the month of April are.
IN PICTURES: 8 Ways To Survive A Market Downturn
Coming Out of Hiding
The Market Vectors Gold Miners ETF (NYSE: GDX) performed relatively well during the first quarter, as shares gained 8.85% amidst a general flight to safety. After the market began to turn around last month, investors became emboldened. Increased appetites for risk lead investors to toss aside GDX for other asset classes. GDX was down 10.76% in the month of April.
Last week, the fund's top holding, Barrick Gold (NYSE: ABX), reported adjusted net income of $298 million, or 34 cents per share, compared to $537 million, or 62 cents per share in the same period last year. Earnings were hurt by lower production volume and higher costs. As for GDX, I would not count on this ETF being down for long. With the Federal Reserve continuing to print money, investors soon will move back into this fund, as concerns surrounding inflation begin to grow.
Another precious metal that shot out of the blocks at the beginning of the year was silver. The iShares Silver Trust (NYSE: SLV), which is designed to track the price of silver, surged 14.2% in the first three months of 2009. This ETF also slowed down during the month of April, for many of the same reasons as GDX. SLV was down 4.5% for the month.
Unyielding Pressure
One side effect of investors' move into riskier asset classes and out of safer investment vehicles is that the yields on T-bonds have been rising. The iShares Trust Barclays 20+ Year Treasury Bond Fund (NYSE: TLT) has watched its yield climb just as it has lost 7.2% of its value in the month of April. Going forward, TLT will likely have to battle inflationary pressure brought upon by the Federal Reserve's continued printing of reams of these bonds to finance mounting deficits.
Out of Gas
The United States Natural Gas Fund (NYSE: UNG), which aims to track the price of natural gas, was one of the best performing ETFs in the first half of 2008. It has since fallen on very hard times. Through the end of the first quarter, this ETF was down 34.4%, as the price of natural gas recently dropped to a six-year low. Following its rocky first quarter performance, UNG then proceeded to shed another 13.6% during the month of April.
Bottom Line
All four of these ETFs fell off pace in the month of April, as the broader markets surged ahead. Although it has been a non-factor so far in 2009, if inflation begins to tick upwards in the next few quarters, investors can expect to see a few of these names reverse sharply to the upside. (Read Buy When There's Blood In The Streets to learn how contrarian investors find value in the worst market conditions.)
IN PICTURES: 8 Ways To Survive A Market Downturn
Coming Out of Hiding
The Market Vectors Gold Miners ETF (NYSE: GDX) performed relatively well during the first quarter, as shares gained 8.85% amidst a general flight to safety. After the market began to turn around last month, investors became emboldened. Increased appetites for risk lead investors to toss aside GDX for other asset classes. GDX was down 10.76% in the month of April.
Last week, the fund's top holding, Barrick Gold (NYSE: ABX), reported adjusted net income of $298 million, or 34 cents per share, compared to $537 million, or 62 cents per share in the same period last year. Earnings were hurt by lower production volume and higher costs. As for GDX, I would not count on this ETF being down for long. With the Federal Reserve continuing to print money, investors soon will move back into this fund, as concerns surrounding inflation begin to grow.
Unyielding Pressure
One side effect of investors' move into riskier asset classes and out of safer investment vehicles is that the yields on T-bonds have been rising. The iShares Trust Barclays 20+ Year Treasury Bond Fund (NYSE: TLT) has watched its yield climb just as it has lost 7.2% of its value in the month of April. Going forward, TLT will likely have to battle inflationary pressure brought upon by the Federal Reserve's continued printing of reams of these bonds to finance mounting deficits.
Out of Gas
The United States Natural Gas Fund (NYSE: UNG), which aims to track the price of natural gas, was one of the best performing ETFs in the first half of 2008. It has since fallen on very hard times. Through the end of the first quarter, this ETF was down 34.4%, as the price of natural gas recently dropped to a six-year low. Following its rocky first quarter performance, UNG then proceeded to shed another 13.6% during the month of April.
Bottom Line
All four of these ETFs fell off pace in the month of April, as the broader markets surged ahead. Although it has been a non-factor so far in 2009, if inflation begins to tick upwards in the next few quarters, investors can expect to see a few of these names reverse sharply to the upside. (Read Buy When There's Blood In The Streets to learn how contrarian investors find value in the worst market conditions.)
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