By Mark DeCambre
Welcome back! We hope you had a good Memorial Day holiday.
It has been a fairly busy stretch for exchange-traded products this week, the surge in shares of "meme" stocks (GameStop Corp. (GME), and some of the other socially driven, assets like BlackBerry (BB.T) and Bed Bath & Beyond (BBBY)./) is rippling through a number of funds that hold AMC Entertainment Holdings ( ),
Meanwhile, the Federal Reserve is unloading some of its $5 billion in ETF and corporate bond holdings () accumulated during the height of the COVID chaos last year, the central bank announced on Wednesday.
As per usual, send tips, or feedback, and find me on Twitter at @mdecambre to tell us what we need to be jumping on. Sign up here () for ETF Wrap.
Answer to last week's mystery chart: FordMotor(F)
The good and the bad
Top 5 gainers of the past week %Return SPDR S&P Oil & Gas Exploration & Production ETF XOP 11.2 VanEck Vectors Rare Earth/Strategic Metals ETFREMX 8.8 iShares MSCI Brazil ETFEWZ 8.5 Global X Uranium ETFURA 8.4 Invesco WilderHill Clean Energy ETFPBW 7.9 Source: FactSet, through Wednesday, June 2, excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater Top 5 decliners of the past week % Return iShares U.S. Medical Devices ETF IHI -2.9 Health Care Select Sector SPDR FundXLV -2.0 iShares U.S. Healthcare ETF IHF -1.7 iShares Global Healthcare ETF IXJ -1.7 Vanguard Health Care ETF VHT -1.4
Visual of the week
Our visual of the week comes from the folks at Bespoke Investment Group. They note that the standout sector performers so far this year are financials (XLF)and energy(XLE), highlighting the rotation that is under way in the wake of the pandemic.
The rotation can be seen in other ways too, with value themes, representing those assets that have been undervalued by some metric, outperforming growth assets, or those that have consistently produced better earnings or revenues or both.
The iShares S&P 500 Value ETF (IVE) is up 17.7% year to date, compared with its growth counterpart, the iShares S&P 500 Growth ETF (IVW), which is up 7.1% so far in 2021, FactSet data show. A large part of that outperformance is on the back of crude oil's surge to a two-year high () and financial stocks climbing as the economy improves.
The big question is will the trend continue.
AMC and GME in ETFs
The record-setting rally for AMC was sending waves through parts of the fund market (), particularly among market-cap weighted ETFs.
The SoFi Social 50 ETF (SFYF), for example, was up 11.2% this week, as of late-morning Thursday. AMC accounted for nearly 24% of the ETF, which was down 6.5% Thursday, from an original allocation of about 5.5%. The ETF tracks an index of 50 U.S. listed stocks that are widely held in brokerage accounts of SoFi (SOFI) based on a weighted average.
The ETF rebalances monthly, but the surge in AMC highlights the challenges that the social-media driven asset can play on funds and other investments.
Meanwhile, the Invesco Dynamic Leisure and Entertainment ETF (PEJ) also finds itself in a similar predicament, with a suddenly amplified weighting of AMC.
The fund, which was down over 3% Thursday, had an AMC weighting of more than 18%. It was 10% on Wednesday.
AMC and GameStop are also in a number of other value-oriented ETFs, including the iShares Russell 2000 Value ETF (IWN), growing in recent months to become the biggest components of that fund.
The Vanguard Small Cap Value ETF an the SPDR S&P 1500 Momentum Tilt ETF (MMTM) also have exposures to the memes, the Wall Street Journal reports ().
It's probably worth noting that funds that offer exposure to social-media driven trends saw mediocre performance. Despite the meme renaissance, VanEck Vectors Social Sentiment ETF (BUZZ) is up a mere 1% on the week. AMC shares, for example, were up 64%, after a punishing double-digit slump playing out Thursday.
Fed's other taper: ETFs
The Fed will soon begin selling corporate bonds and ETFs amassed last year through an emergency-lending operation, known as the Secondary Market Corporate Credit Facility.
The SMCCF held $8.56 billion of fixed-income ETFs that also hold corporate debt, including the Vanguard Short-Term Corporate Bond ETF (VCSH).
The divestiture shouldn't be consider a part of the central bank's monetary policy plans, with investors focused on the $120 billion a month asset-purchases. However, as the Fed conducts its unwind, signs of disruptions in the market will be closely watched.
The Fed does not own a lot of LQD (LQD)and VCIT (VCIT) but its announced buying provided support for bond market during a period of stress and stability when it was needed, said Todd Rosenbluth, head of ETF and mutual fund research for CFRA, told MarketWatch.
The CFRA analyst recently wrote that fixed-income ETFs comprised an above-average 35% share of insurance company assets at the end of 2020, according to S&P Dow Jones analysis.
He said that those investors may be eager to step in if the Fed is exiting.
"Insurers were net sellers of equity ETFs last year despite a strong recovery from first-quarter lows, but the industry collectively added $5 billion to fixed income ETFs," Rosenbluth wrote in a report published May 27.
Bio rhythm change?
The $10 billion iShares Nasdaq Biotechnology ETF (IBB), which tracks the Nasdaq Biotechnology Index, is changing in line with changes in the index it tracks, Rosenbluth notes. The biotech ETF has registered two back-to-back years of gains nearing 25% in 2019 and again in 2020.
But it is lagging behind the market so far in 2021, down 0.4%. (It's worthing noting that health-care, generally, was a poor performer this week and a middling performer as per ETF Wrap's weekly performance table and Visual of the week)
Thirty-two companies will be added to the ETF, including large-caps IQVIA Holdings Inc. (IQV), Waters Corp. (WAT), Mettler-Toledo (MTD), as well as smaller names like Berkeley Lights (BLI)and Quanterix (QTRX), Rosenbluth said.
-Mark DeCambre; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
June 05, 2021 09:10 ET (13:10 GMT)
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