The first quarter is in the books and the S&P 500 finished with a decent though not spectacular gain of about 2%.
Of course, there are two sides to every coin. It can be said that the performance of U.S. stocks in the first three months of 2014 is pretty good, all things considered. “All things” including a cold spell that swept the East Coast and Midwest, providing excuses for weakness in sectors such as consumer discretionary. Then there was the spate of weak economic data out of China and Russia’s invasion of Ukraine to weigh on the minds of global investors.
The less cheery view is that the performance of U.S. stocks in the first quarter represents precious little in the way of follow through to last year’s almost 33% gain for the S&P 500.
Although the last few weeks of the quarter brought significant retrenchment in some momentum ETFs, others shined bright throughout the quarter. That group includes some asset classes, namely commodities, that were decimated last year.
Among the first quarter’s best ETFs and ETNs are the following, starting with the…
iPath Dow Jones-UBS Softs Total Return Sub-Index ETN (NYSEArca: JJS)
Year-to-Date Gain: 22.7%
Comment: As is the case with several members of this list, JJS has soared due to its exposure to resurgent soft commodities. In the case of this ETN, that would be sugar (48.4%), coffee (31.3%) and cotton (20.2%). Of the ETNs for those individual commodities, the iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEArca: SGG) is the “laggard” so far this year and that is saying something as SGG is up nearly 8%.
iPath Pure Beta Softs ETN (NYSEArca: GRWN)
YTD: 24.2%
Comment: GRWN is a different spin on JJS with higher allocations to coffee and cotton, but investors should note this ETN is small and extremely thinly traded.
Market Vectors Indonesia Small-Cap ETF (NYSEArca: IDXJ)
YTD: 29.4%
Comment: Some avid emerging markets investors undoubtedly remember the bitter disappointment of Indonesia ETFs last year. That is when the two large-cap ETFs focused on Southeast Asia’s largest economy each tumbled more than 23%.
Those declines, hastened by a widening current account deficit and faltering currency, ushered Indonesia into a dubious group of emerging markets, known as the Fragile Five or BIITS. This year, Indonesian equities have proven to be anything but fragile as Citigroup, JPMorgan Chase and Morgan Stanley have all turned bullish on Indonesian stocks and foreign investors have come running back to this market. [Interest Increasing in Indonesia ETFs]
Market Vectors Egypt Index ETF (NYSEArca: EGPT)
YTD: 24.7%
Comment: The lone Egypt ETF has been a tale of two performances during the first quarter. Overall, there is no denying that EGPT is one of the best-performing single-country emerging markets ETFs and that the ETF has benefited from the perception of increased stability in the often fractious North African nation. Impressively, EGPT has maintained its uptrend despite Russell Investments earlier this month downgrading Egypt to frontier market status. However, the ETF is off more than 6% in the past week even as more traditional emerging markets fare has soared. [Egypt ETF in Play on Russell Demotion]
PowerShares DB Commodity Long ETN (NYSEArca: DPU)
YTD: 29.1%
Comment: DPU is another multi-commodity ETN, but this product’s stellar first-quarter performance has not been driven entirely by soft commodities, though it has decent agriculture exposure with corn and wheat futures combining for over 21% of the ETN’s index. A viscous cold spell this winter boosted heating oil prices, providing a lift to DPU as the ETN has a 20% weight to that commodity.
PowerShares DB Agriculture Long ETN (NYSEArca: AGF)
YTD: 39%
Comment: AGF is a perfect example of an ETN being at the right place at the right time. Wheat futures, which represent over a quarter of AGF’s weight, have been bolstered by the crisis in Ukraine. Like coffee, sugar has soared due to poor weather in Brazil. Corn, another 25% of AGF’s weight, has been on the up and up since the start of the year. AGF is up 39% with NO coffee exposure. [Corn May be the Next Coffee]
iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO)
YTD: 60.7%
Comment: Speaking of coffee, the honor of best-performing non-leveraged ETF of the first quarter goes to JO and it should not be ignored that the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) is in the second spot with a gain of more than 57%.
Both ETNs pulled back a bit in the back half of March on growing hopes that rainfall will alleviate Brazil’s drought. Brazil is the world’s largest producer and exporter of Arabica-grade coffee beans. On Monday, research published by ETF Securities said coffee exchange traded products have seen outflows for nine straight weeks. [Palladium, Silver ETFs Gain Investor Favor]