No matter what ETF you’ve bought this year, it’s probably made you money. Fully 84 percent of U.S.-listed exchange-traded funds are up in 2017.
“Considering there are almost 2,000 in the U.S. marketplace alone, that is a lot of different styles, sectors, asset classes, that are all working. They’re all flat on the year or up on the year, with only a small minority down,” Convergex’s chief market strategist, Nicholas Colas, said in a Thursday interview on CNBC’s “Trading Nation.”
He added: “This is just one exemplar that says, ‘Money is pushing into basically everything.'”
Unsurprisingly, the best- and worst-performing large-cap ETFs year to date reflect the market’s winning sectors (short positions in volatility, long positions in technology) and losers (long positions in volatility, long positions in energy names) this year.
The best-performing large U.S.-listed ETF is the VelocityShares Daily Inverse XIV Short-Term ETN — having advanced 59 percent this year — followed by other funds reflecting this year’s low volatility and leadership in technology stocks, like the ProShares Short VIX Short-Term Futures ETF and the ProShares UltraPro QQQ.
Meanwhile, the worst-performing large-cap ETF year to date is the iPath S&P 500 VIX Short-Term Futures ETN, down 41 percent this year, followed by names that would benefit from a rise in volatility or in commodity prices.
While this might be the natural place to look for opportunities, there isn’t a whole lot in the lagging bunch that strikes Colas as a good buy. Oil has plummeted this year, depressing the value of assets closely tied to its price. Perhaps in a couple of months, he said, some names like the Direxion Daily Energy Bull 3x Shares ETF (down nearly 28 percent this year) may turn around.
Overall, “the breadth is healthy, the rotations have been healthy,” Michael Block, chief strategist at Rhino Trading Partners, told CNBC in a Friday phone interview. “There is some complacency, but there’s a healthy enough dose of skepticism to keep this rally afloat for the time being.”
Strategists have widely noted that ETF inflows have surged recently, given the funds’ relatively low cost, reputation for typically beating active managers’ stock picks and the chance for thematic investing.
Colas noted ETFs have seen $160 billion year to date, which would have been “a whole year’s money flows three or four years ago.” And that’s in addition to positive flows into equities, fixed income, commodities and volatility plays.
“Pretty much everyone out there is making money. Or at least not losing,” Colas wrote in his note to clients published Wednesday, likening the state of global equity markets to, more or less, “one very large party.”