Equity markets rallied in December, closing near all-time highs, and capping off a third consecutive year of solid double-digit gains. The benchmark S&P 500 Index gained 4.5% in the final month of the year while the Nasdaq Composite Index gained just 0.7%. A rotation away from growth-oriented equities accelerated during December as investors continued to re-price the cohort lower amidst continued inflationary fears and comments from U.S. Federal Reserve (Fed) Chair Jerome Powell following its December 2021 meeting, at which time he indicated a desire to increase the speed of paring bond purchases, thus ending its quantitative easing program earlier than anticipated. Value-oriented equities continued to outperform their growth-oriented peers fueled by inflationary data, which remains at multi-decade highs. Energy, Real Estate and Financial stocks were the top three performing sectors of 2021, the first year since 2016 that the S&P 500 Index outperformed the technology focused Nasdaq Composite Index.
The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) returned -7.5% during the month of December trailing the S&P 500’s return of 4.5% as of the end of the month. Continue reading for details on recent performance and the latest Index reconstitution.
Ford Surge on EV Push while Healthcare and “Meme”-related Stocks Pace Decliners
Ford Motor Co (F) paced advancing stocks, gaining more than 25% in value during the recent period between selection dates of the BUZZ Index (Dec. 9, 2021 through Jan. 12, 2022). The automaker announced it would nearly double planned production of the new electric F-150 Lightning, targeting production of 150,000 F-150 Lightnings per year by 2023, up from a prior goal of 80,000. Investors cheered news that the storied automaker had already received 200,000 reservations for the electric version of its flagship truck. EV market darling Tesla gained more than 10% in value during the recent period between selection dates of the BUZZ Index as its stock rebounded from a 20% decline in value spurred by share sale announcements from its founder Elon Musk. Investor sentiment was further bolstered by the company’s announcement that it smashed its previous record for vehicle sales by delivering 308,600 cars in the fourth quarter. The stronger-than-expected results brought total sales in 2021 to 936,000, around 87% higher than a year earlier.
| Top BUZZ Index Contributors: December 9 2021 – January 12, 2022 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| Ford Motor Co | F | 2.20 | 0.47 |
| Tesla Inc | TSLA | 3.20 | 0.28 |
| ViacomCBS Inc | VIAC | 1.46 | 0.23 |
| Carnival Corp | CCL | 0.89 | 0.19 |
| Boeing Co/The | BA | 2.29 | 0.16 |
| AT&T Inc | T | 0.81 | 0.13 |
| Micron Technology Inc | MU | 0.93 | 0.11 |
| Pfizer Inc | PFE | 2.29 | 0.11 |
| Uber Technologies Inc | UBER | 0.72 | 0.09 |
| Merck & Co Inc | MRK | 0.78 | 0.08 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.
The top detractors to performance within the period between selection dates of the BUZZ Index featured COVD-19 vaccine manufacturers and ‘Meme’-related stocks. As the number of Omicron variant cases continued to surge around the world, shares of Novavax Inc (NVAX) and Moderna Inc (MRNA) both slid to six-month lows as investors increasingly took a favorable view of the prospects of Pfizer Inc’s (PFE) oral COVID-19 pill, Paxlovid. Notably, the U.S. government announced it would double its commitment to the new pill, procuring an additional 10 million doses. Shares of original meme-stock darlings AMC Entertainment (AMC) and GameStop Corp (GME) posted steep losses during the recent selection dates of the BUZZ Index. An announcement on January 6, 2022, from GameStop that the company is starting an NFT unit to develop a marketplace for the tokens as well as creating crypto partnerships, led to shares of GME spiking 20% in pre-market trading. The enthusiasm was short lived as those gains reversed and shares of GME continued lower throughout the period.
| Bottom BUZZ Index Contributors: December 9 2021 – January 12, 2022 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| Novavax Inc | NVAX | 2.93 | -0.73 |
| AMC Entertainment Holdings Inc | AMC | 2.69 | -0.58 |
| Moderna Inc | MRNA | 2.81 | -0.54 |
| GameStop Corp | GME | 2.85 | -0.50 |
| Upstart Holdings Inc | UPST | 1.08 | -0.48 |
| Affirm Holdings Inc | AFRM | 1.17 | -0.48 |
| Roku Inc | ROKU | 1.85 | -0.47 |
| Snap Inc | SNAP | 1.28 | -0.47 |
| ROBLOX Corp | RBLX | 1.92 | -0.45 |
| DraftKings Inc | DKNG | 2.69 | -0.43 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.
Market Insights – S&P 500 Proving Difficult to Beat
The benchmark S&P 500 Index has proved remarkably resilient in outperforming other approaches to large cap equity selection, with 2021 a standout year in that regard. As the charts below highlight, the concentrated nature of mega-cap stocks within the S&P 500 Index has led to its outperformance over all equity ETFs, regardless of their style breakdown over time.
Percent of ETFs Outperforming S&P 500 | June 2003 – December 2021
Source: BUZZ Holdings ULC, Bloomberg Intelligence. Excludes Leverage and Inverse ETFs. Monthly Returns. Past performance is no guarantee of future results.
Style Breakdown of ETFs Outperforming S&P 500 | June 2003 – December 2021
Source: BUZZ Holdings ULC, Bloomberg Intelligence. Excludes Leverage and Inverse ETFs. Monthly Returns. Past performance is no guarantee of future results.
The BUZZ Index, pressured by the Q4 2021 rotation away from growth related equities, fell victim to S&P 500 underperformance during 2021. As the chart below depicts, BUZZ’s underperformance for the year largely occurred in the final months of Q4; however, unlike other approaches to U.S. equity selection highlighted in the above charts, the approach deployed within the BUZZ Index, which selects constituents based on those stocks which exhibit the highest levels of positive investor sentiment, has outperformed the S&P 500 Index on an total return basis over the three-year (32.8% vs 26.1%) and five-year (23.4% vs 18.5%) periods as of the end of 2021.
2021 Performance BUZZ Index vs S&P 500 | 1/1/2020 – 12/31/2021
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance.
BUZZ Index January 2022 Rebalance Highlights
SoFI Technologies
Over the past few months, the BUZZ Index has featured several new constituents that were brought public in a Qualifying Transaction of a Special Purpose Acquisition Company (SPAC). This month, the largest new addition to the Index is another such example, SoFi Technologies (SOFI). Social Capital Hedosophia Holdings Corp V (formerly, IPOE) completed a Qualifying Transaction with SOFI on June 1, 2021. IPOE was led by famed billionaire Chamath Palihapitiya, whose previous SPAC mergers included innovative companies such as Virgin Galactic (SPCE) and Opendoor (OPEN). SOFI began as a personal finance company aimed at providing affordable financing for students but has since expanded its offerings to provide investing and payment solutions, particularly within the cryptocurrency segment. Since debuting at $10 per share, SOFI has been extremely volatile, trading between $25 and $15 multiple times. Currently in the midst of another pullback, shares of SOFI have broken the lower bound of its trading range, yet investor sentiment has increased significantly. Investors may be of the view that the recent selloff presents a ‘value’ buying opportunity. SOFI enters the BUZZ Index this month at a maximum 3% weight.
Vir Biotechnology
As the pandemic approaches its second anniversary, extensive research has occurred within the biotechnology field with respect to the virus. Aside from the well-known COVID-19 vaccines, several biotechnology companies have begun to develop alternative methods of treating the virus, including pills for symptoms as well as antibody drugs. One of these companies, Vir Biotechnology (VIR), has been making substantial progress on this front over the past year. Its main Covid antibody treatment, Sotrovimab, received emergency use authorization from the FDA in May 2021. Recently, the U.S.government ordered an additional 600,000 doses of the drug for Q1 2022, with the option to purchase more in Q2. The drug has been approved for use in other countries as well, bringing the total doses sold worldwide to 1.7 million. Shares of VIR, which spiked when COVID-19 was first reported in 2020, have since been extremely volatile; however, with the virus and its variants showing no signs of abating, demand for treatments such as Sotrovimab appear to be strong for the foreseeable future. Investor sentiment is becoming increasingly positive on biotechnology companies other than the large vaccine-makers, and this month VIR enters the BUZZ Index with a 0.52% weight.
For more on the rebalance results, view the BUZZ Index reconstitution report.
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Originally published by VanEck on January 21, 2022.
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