Best & Worst Zones Of 2018 And Their ETFs

After a roaring start to 2018, stock markets across the globe have been on a tumultuous ride triggered by a myriad of woes, including growing inflationary threats, surge in yields, tech selloff, tariff war, slowing growth in emerging and developed markets, and the flattening of U.S. yield curve that has sparked threats of a global slowdown. In fact, the global equities have erased about $13 trillion from its market value this year.

Oil slipping into the bear territory lately has led to further caution among investors. Meanwhile, commodities have been on the longest losing streak in more than three years. However, gold regained shine in the fourth quarter on global headwinds and a dovish Fed outlook that has boosted demand for the metal.

However, strong corporate earnings and an improving economy buoyed by an impressive labor market, higher wages, increasing consumer spending and rising consumer confidence fueled confidence in riskier assets. Notably, the American economy is on track this year to expand at the fastest pace in 13 years.

Given this, a few corners of ETF investing have performed exceptionally well while some areas are lagging. Below we have highlighted the best and worst zones of 2018 and their ETFs in detail:

Best Zones

Volatility

Volatility products have been the biggest winners as they outperform when investors are skeptical about market direction. In particular, VelocityShares Daily Long VIX Short-Term ETN (VIIX - Free Report) has surged nearly 75% this year. The product is linked to the daily performance of the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It has amassed $26.1 million in AUM and charges 75 bps in fees per year. The fund trades in average daily volume of 160,000 shares.

Natural Gas

Natural gas prices were on the rise this year thanks to tightening demand/supply imbalance. The United States entered the winter drawdown season with natural gas storage levels at their lowest level in 15 years. Additionally, seasonality plays an important role in driving the price higher. Cold spring, hot summer and a cold start to winter in November led to higher demand for natural gas. That said, United States Natural Gas Fund (UNG - Free Report) has risen 23.8%. The fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. It has AUM of $371.8 million and trades in volume of around 4 million shares per day. The fund charges 1.30% in expense ratio.

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