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Wall Street has been on a choppy ride since the start of 2022 due to red-hot inflation, rising-rate worries, the surge in COVID cases in China and renewed lockdowns as well as geopolitics in East Europe.In fact, stocks are off to their worst start to a year since 1942, as quoted on a CNBC article. The S&P 500 is down 12.2% this year.
The 10-year U.S. Treasury yield hit a level not seen since late 2018 on Federal Reserve’s faster policy tightening plan. Higher inflationary expectations emanating from supply chain disruptions as well as higher crude prices made Fed members comfortable with this kind of aggressive monetary policy tightening.
The unsteady investing backdrop has been seen across the world. The Russia-Ukraine tensions and the resultant Western sanctions against Russia has heightened the chaos in the market. Notably, both Russia and Ukraine are commodity-rich. No wonder, the war has sent prices for energy (Russia is a key exporter of natural gas), grains, and metals surging.
Plus, commodity investing is seen as an inflation-protecting tool. Higher inflation is feared to weaken corporate earnings, which in turn, would hurt equity prices. In such a scenario, commodities may gain as an alternative investment.
The rally in the energy market has been very pronounced. The coronavirus vaccine rollout is gradually helping to control the spread of the outbreak across the globe. This has been helping in economic reopening and boosting oil demand. Factors like easing Omicron variant concerns, supply shortages, and geopolitical tensions in Eastern Europe and the Middle East have thus boosted oil prices so far this year materially.
Russia and Ukraine are major exporters of grains. Both countries are major wheat producers. As the conflict shows no signs of easing, Ukrainian farmers are finding it difficult to plant spring crops. Supply chain disruptions are other concerns. Hence, agricultural commodities have been exhibiting an uptrend.
Some defensive investing strategies also managed to win this year. It is important to hedge one’s portfolio with defensive ETFs like long/short or dividend ones. So, we have seen some gains in defensive ETFs and the ones that fight against rising rate worries.
Against this backdrop, below we highlight a few ETF areas that successfully trumped market slump and gained materially this year.
iPath Series B Bloomberg Natural Gas Subindex GAZ – Up 88.0%
United States Natural Gas ETF UNG – Up 86.5%
Teucrium Wheat ETF WEAT – Up 49.7%
Teucrium Corn ETF CORN – Up 38.1%
iPath Series B Bloomberg Agriculture Subindex Total Return ETN JJA – Up 26%
United States Commodity ETF USCI – Up 32.9%
Invesco DB Commodity Index Tracking ETF DBC – Up 30.1%
AGFiQ US Market Neutral AntiBeta ETF BTAL – Up 12.8%
Advocate Rising Rate Hedge ETF RRH – Up 10%
AGFiQ Hedged Dividend Income ETF DIVA – Up 8.6%
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.