February was mostly a continuation of the themes that began to take root in January. Namely, inflation was still spiraling out control, the conflict between Russia and Ukraine could exacerbate some of those inflationary pressures and the Fed is about to aggressively raise rates at a time when the global economy is already slowing. Consumer sentiment is low and investors are worried that a recession is a possibility as early as 2023.
The selling, however, hasn't been huge or out of control. Small-caps actually gained about 1% on the month even though large-caps and the headline indexes were in the red. Treasuries remained volatile - first to the downside as investors repriced in interest rate expectations for the rest of the year and second back to the upside when the Ukraine conflict had investors searching for safe havens. Outside of small-caps, riskier investments, such as high beta and tech, continued to underperform, but there's a real lack of conviction towards any particular theme at the moment.
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Commodities was the one area of the market that did well in February. This is a direct result of the global inflationary pressures and still present supply chain disruptions that are making inputs and materials more costly everywhere. Gold and silver finally got some attention as investors sought out true stores of value, but it was the industrial metals, such as copper and even uranium, that drew the most interest. Agricultural commodities, including those were Russia and/or Ukraine are heavy exporters, also saw significant price gains.
Here's the list of the top performing ETFs for February 2022.
The SPDR S&P Metals & Mining ETF (XME) was the month's biggest winner, logging a gain of more than 26%. This fund is a bit unique in this space in that it targets miners of both industrial and precious metals as well as other products. About 40% of assets are dedicated to steel producers with another 20% going to coal & combustible fuels. Precious metals account for a more modest 16% allocation, but it targeted all the areas that rallied this past month.
The performance of the Teurcrium Wheat ETF (WEAT) is a direct result of the Russia/Ukraine conflict. Russia is the biggest global exporter of wheat, but Ukraine is also the 5th largest. Combined, they account for more than 1/3 of global wheat exports. As the conflict rages on and the risks of yielding a good harvest in the spring planting season grow, wheat prices have soared. Soybeans and corn are two other agricultural commodities also at risk.
The number of precious metals funds on this list is huge. The WisdomTree Efficient Gold Plus Gold Miners Strategy ETF (GDMN), which combines holdings in physical gold with gold miners stocks, was the best of the bunch returning 17%. The VanEck Gold Miners ETF (GDX) and VanEck Junior Gold Miners ETF (GDXJ) are perhaps the two best-known ETFs in the space, but they were just two of the 10 funds in total focused primarily on precious metals miners. The Sprott Gold Miners ETF (SGDM), the ETFMG Prime Junior Silver Miners ETF (SILJ) and the U.S. Global GO GOLD & Precious Metals Miners ETF (GOAU) all landed in the top half of this list gaining more than 13% each.
Clean energy ETFs made a bit of a comeback following a year in which they were among the industries worst performers. The VanEck Green Metals ETF (GMET), the Global X Hydrogen ETF (HYDR), the Global X Solar ETF (RAYS) and the iShares Global Clean Energy ETF (ICLN) all posted double digit returns. The latter, which is the largest clean energy ETF in the industry, is still down more than 20% over the past year.
Uranium is another commodity that toes the line between industrial metals and clean energy, but it was among the best of the bunch in February. The Global X Uranium ETF (URA) and the North Shore Global Uranium Mining ETF (URNM), both of which focus on miners and nuclear component producers, both returned 16-17%. Both of these funds tend to produce returns that are very similar to each other, although URNM has done slightly better over the past year, returning 45%.
Other ETFs worth noting:
The SonicShares Global Shipping ETF (BOAT) continues in the tradition of shipping ETFs showing up on the best or worst performer list regularly. Even though global supply chains have begun easing and shipping costs have come down, BOAT still managed to deliver a double digit return. Its counterpart, the Breakwave Dry Bulk Shipping ETF (BDRY), actually lost 2% in February.
Trying to find ETFs on this list focused on something else besides energy and commodities is a little tough, but the SPDR S&P Aerospace & Defense ETF (XAR) snuck in with an 11% return. This, of course, is a reflection of the Russia/Ukraine situation where defense stocks rose almost across the board.