Heading into Friday’s session, the S&P 500 looks poised to close May in fine form. The benchmark U.S. index is residing near all-time highs and is sitting on a May gain of almost 2%.
Those are impressive accomplishments in any month, but even more so in May. The fifth month of the year marks the start of what is, historically, the weakest six-month period for stocks.
But as is the case every month, regardless of how strong the broader market was in that month, there were noticeable pockets of weakness in May. Notable about this month’s group of the worst-performing exchange traded products is that several of these ETFs and ETNs have been stars for much of this year.
All performance data on this list is courtesy of Morningstar and is as of Thursday’s close. The list starts with the…
iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO)
May loss: 12.9%
Comment: JO still ranks as this year’s top-performing non-leveraged ETF or ETN, but a year-to-date performance that was once close to being a double has dwindled to “just” 61%. With a May loss of nearly 12%, the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) also ranks among this month’s worst ETPs.
Much of the run-up in coffee prices this year has been attributable to a drought in Brazil, the world’s largest producer of Arabica beans, but weather has recently been cooperative in Colombia. That has helped take some of the air out of the long coffee trade. [El Nino With a Chance of Agriculture ETFs]
Global X Gold Explorers ETF (NYSEArca: GLDX)
May loss: 11.8%
Comment: It was not that long ago that gold mining ETFs were the toast of the town. Those ETFs, including GLDX, spent the first two and a half months of 2014 performing one of the best ETF recovery acts in recent memory after spending 2013 getting drubbed.
In fact, GLDX was near the top of the best non-leveraged ETFs list in the earlier stages of 2014, but with gold prices tumbling again, mining ETFs are being punished in a sequel to a scenario seen throughout 2013. [Gold Miners ETF Flows, Return Go Their Own Ways]
The Global X Pure Gold Miners ETF (NYSEArca: GGGG), iShares MSCI Global Gold Miners ETF (NYSEArca: RING) and the PowerShares Global Gold and Precious Metals Portfolio (NasdaqGS: PSAU) were also among the more egregious mining ETF offenders this month an average loss of about 9%.
Market Vectors Gold Miners ETF (NYSEArca: GDX)
May loss: 8.1%
Comment: As the largest gold miners ETF, GDX commands its own spot on this list. Important to the medium-term outlook for the companies held by GDX is that the positive impact of previous production cuts is waning.
“Cuts to capex and exploration costs, and high grading, are helping margins near term. However, it is a double edged sword. The reason is that gold companies have to spend an increasing amount of capex just to fight a falling production trend and prevent a blow-out in unit costs,” said Citigroup in a note out Thursday.
The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) is also off more than 8% this month. Both GDX and GDXJ are close to giving up all of their 2014 gains.
Global X Silvers Miners ETF (NYSEArca: SIL)
May loss: 8.4%
Comment: When gold weakens, silver usually does so in more dramatic fashion. SIL is not the only offender among silver mining ETFs this month as two other funds are close to earning spots on this list. Still, some see upside potential for the white metal.
“Often viewed by investors as a leveraged play on gold, silver is an attractive longer term portfolio diversifier in our view, with a low correlation to most other major asset classes yet offering protection from currency debasement risk and inflation,” said ETF Securities in a new research note.
Teucrium Wheat Fund (NYSEArca: WEAT)
May loss: 8.7%
Comment: Wheat futures were bid higher earlier this year due harsh winter weather in the U.S. and escalating tensions in Ukraine. That thesis has been derailed on expectations of robust global supply and favorable planting conditions in the U.S. Earlier this month, wheat futures suffered their worst back-to-back losses in 15 years.
iPath Dow Jones-UBS Cotton Total Return Sub-Index (NYSEArca: BAL)
May loss: 8.4%
Comment: Cotton futures rose Thursday helping BAL to the upside, but the ETN has posted just three winning days this month. Some technicians see additional downside for cotton due to poor chart structure.
Teucrium Corn Fund (NYSEArca: CORN)
May loss: 7.4%
Comment: Corn’s four-month winning streak is coming to an end in what is shaping up to be the biggest monthly drop in nearly a year.
“Planting in key U.S. growing areas matched the average of the previous five years, according to the the U.S. Department of Agriculture. The USDA added that it estimates domestic production could climb to a record level in the 2014-2015 season,” according to FOX Business.