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What just happened?
If ETF Wrap had a list of New Year’s resolutions, top among them would be to banish 2020isms like “unprecedented” and “pivot” from our vocabulary.
Also: no more cute names for market churn that ultimately goes nowhere. (Earlier in the fall, we compared it to cats watching Wimbledon, last week we called it “zigzagging,” the week before, “pingponging.”)
What we do pledge to do is continue bringing fresh content about ETFs: new launches, interesting strategies, industry profiles, and much more.
This will be the last Wrap of 2020 — a year that really will live in infamy.
Happy holidays, thanks for reading, and stay warm and healthy!
A 2021 forecast
Every year, portfolio strategist Astoria Advisors publishes a report on its picks for the top 10 ETFs for the coming year. Founder John Davi was also brave enough to share with MarketWatch a reminder of his report from last year: that is, the firm’s calls for 2020.
Even though the world went upside-down in 2020, some of Astoria’s calls made out well, such as the iShares MSCI China ETF MCHI, +1.59%, which has gained 24.5% in the year to date, and the VanEck Vectors Gold Miners ETF GDX, +0.08%, which is up 22.7%, as of Wednesday’s close. But there were some misses as well: the Invesco KBW Bank ETF KBWB, -0.26% is down 14.7%, and the SPDR S&P Emerging Markets Dividend ETF EDIV, +0.07% has lost 14.5%.
Yes, it was a tough year to forecast – but that’s the risk you take when you publish a forecast. And Davi is a big believer in strategic asset allocation, not high-frequency trading, as he told MarketWatch in October.
For 2021, Astoria is betting on commodity equity ETFs, healthcare, cyclical growth funds, clean energy, and more. The full report can be found here and several of the firm’s specific picks are below.
| Theme | ETF |
| Commodity Equities | Global X Copper Miners ETF COPX, -0.99% |
| HealthCare | Ark Genomic Revolution ETF ARKG, -8.81% |
| Cyclical Growth | Industrial Select Sector SPDR Fund XLI, -0.16% |
| Higher Quality US Small-Caps | WisdomTree U.S. SmallCap Fund EES, -0.43% |
| China | iShares MSCI China ETF MCHI, +1.59% |
| Source: Astoria Advisors |
Exchange-traded sundries
- ETF powerhouse Invesco has launched four actively-managed non-transparent ETFs. In a statement, the firm called its new offerings “a bridge between traditional active and passive strategies.”
- What’s the theme of 2020? ETF industry veteran Dave Nadig offered this suggestion on Twitter:
Is there an ETF for that?
There are plenty of good reasons to consider investing in emerging markets now – and one particularly promising way to do it.
“Taiwan is more important than ever from an investment standpoint and a strategic one,” said Perth Tolle, founder of the Freedom 100 Emerging Markets ETF. “Its location makes it geographically important for the US in case anything happens in the South China Sea. It’s ideologically important because it’s a country made up of Chinese people that is also a successful democracy. And it is the world leader in industries that are strategically important for our supply chain – in particular semiconductors.”
MarketWatch profiled Tolle’s ETF, often referred to by its ticker, FRDM, +0.83%, when it launched in 2019. At the time, we called it perhaps “the ultimate example of trying to do well financially by doing good,” recognizing that its investment thesis – that countries committed to human and economic freedoms will enjoy more favorable financial returns over time – may sound Pollyannaish.
Yet it’s been borne out this year, especially, as Tolle said in an interview, “in contrast to the elephant in the room, China.”
Taiwan is a far freer economy and society than China, she points out, and that’s translated into returns through the 2020 recovery. Since the March 23 low, the iShares MSCI Taiwan ETF EWT, +0.23% has gained 71%, trouncing the 55% return for the Xtrackers Harvest CSI 300 China A-Shares ETF ASHR, -0.31%.
“In a recovery especially you want to be in the freer markets,” Tolle said. “They are more flexible and more innovative and can respond to market trends faster.”
The longer-term decoupling from China that’s likely to continue under a Biden administration is also to Taiwan’s benefit. And Tolle thinks that even as China grows more bellicose toward Taiwan, ultimately it’s just hot air.
FRDM has 26% of its portfolio allocated to Taiwanese companies, with Taiwan Semiconductor TSM, -0.29% as its largest single holding. It has gained 12.1% in the year to date, just trailing the 14.2% return for the S&P 500 – but in the last three months, has surged 26.2%.
Visual of the week
Many more investors say the global economy is in an early-cycle phase (70%, highest since January 2010) as opposed to recession (12%), which as seen in 2009 & 2012 is a key recovery milestone.
Weekly rap
Editor’s note: MarketWatch has adjusted the parameters of the FactSet screen used to calculate our weekly gainers, losers, and inflows. We hope the new methodology will offer a more complete view of the ETF market.
| Top 5 gainers of the past week | |
| Global X Cybersecurity ETF BUG, -1.71% | 17.8% |
| ARK Genomic Revolution ARKG, -8.81% | 13.1% |
| Direxion Moonshot Innovators ETF MOON, -2.61% | 12.5% |
| Invesco Solar ETF TAN, -3.78% | 12% |
| SPDR S&P Kensho Clean Power ETF CNRG, -2.58% | 11.5% |
| Source: FactSet, through close of trading Wednesday, December 23, excluding ETNs and leveraged products | |
| Top 5 losers of the past week | |
| Columbia Research Enhanced Value ETF REVS, -0.07% | -21% |
| VanEck Vectors Unconventional Oil & Gas ETF FRAK, -1.27% | -8.5% |
| VanEck Vectors Russia Small-Cap ETF RSXJ, +0.55% | -7.5% |
| VanEck Vectors Oil Services ETF OIH, -0.89% | -7.4% |
| Invesco S&P 500 Equal Weight EnergyETF RYE, -0.03% | -7.1% |
| Source: FactSet, through close of trading Wednesday, December 23, excluding ETNs and leveraged products | |
| Top 5 biggest inflows of the past week | |
| SPDR S&P 500 ETF Trust SPY, +0.13% | $7.84 billion |
| Invesco QQQ Trust QQQ, +0.19% | $2.53 billion |
| iShares Russell 2000 ETF IWM, -1.38% | $2.51 billion |
| iShares Core MSCI Emerging Markets ETF IEMG, +0.97% | $1.2 billion |
| iShares U.S. Real Estate ETF IYR, -0.16% | $923 million |
| Source: FactSet, through close of trading Wednesday, December 23, excluding ETNs and leveraged products | |
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