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
CompanyTickerAverage Weight (%)Return Contribution (%)
Ford Motor CoF2.200.47
Tesla IncTSLA3.200.28
ViacomCBS IncVIAC1.460.23
Carnival CorpCCL0.890.19
Boeing Co/TheBA2.290.16
AT&T IncT0.810.13
Micron Technology IncMU0.930.11
Pfizer IncPFE2.290.11
Uber Technologies IncUBER0.720.09
Merck & Co IncMRK0.780.08

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
CompanyTickerAverage Weight (%)Return Contribution (%)
Novavax IncNVAX2.93-0.73
AMC Entertainment Holdings IncAMC2.69-0.58
Moderna IncMRNA2.81-0.54
GameStop CorpGME2.85-0.50
Upstart Holdings IncUPST1.08-0.48
Affirm Holdings IncAFRM1.17-0.48
Roku IncROKU1.85-0.47
Snap IncSNAP1.28-0.47
ROBLOX CorpRBLX1.92-0.45
DraftKings IncDKNG2.69-0.43

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

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

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

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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Important Disclosures

Company data is the source for all particular company information quoted.

Definitions: The S&P 500 is a stock market index of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Composite Index is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of 3rd party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

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Effective August 18, 2016, BUZZ Indexes Inc. implemented changes to the BUZZ NextGen AI US Sentiment Leaders Index construction rules. The index constituent count was increased from 25 to 75 stocks and the maximum constituent weight was reduce from 15% to 3%. These change may result in more a diversified exposure to index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.

The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2021 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

An investment in the Fund may be subject to risks which include, among others, risks related to social media analytics, investing in equity securities, medium-capitalization companies, information technology, communication services, consumer discretionary, health care and industrials sectors, market, operational, high portfolio turnover, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.

Investing in companies based on social media analytics involves the potential risk of market manipulation because social media posts may be made with an intent to inflate, or otherwise manipulate, the public perception of a company stock or other investment. Although the Sentiment Leaders Index provider attempts to mitigate the potential risk of such manipulation by employing screens to identify posts which may be computer generated or deceptive and by employing market capitalization and trading volume criteria to remove companies which may be more likely targets for such manipulation, there is no guarantee that the Sentiment Leaders Index’s model will successfully reduce such risk. Furthermore, text and sentiment analysis of social media postings may prove inaccurate in predicting a company’s stock performance.

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