These 3 ETFs Are Down 20% – VXX, GDXJ, JO
There’s no denying stocks have had a great run over the last four weeks. During that time, the S&P 500 is up more than 12%.
But not all ETFs have enjoyed the ride…
In fact, if you invested money in any of the following ETFs four weeks ago, you have lost a big chunk of money. Let’s take a look at three of the worst performing ETFs over the last four weeks…
Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX)
VXX is an interesting product. It’s an exchange traded note that gives retail investors an easy way to get exposure to the VIX futures contract.
In short, the VIX measures the implied volatility of the S&P 500. Higher implied volatility equates to a higher price for VXX and lower volatility means a lower price.
Four weeks ago when the S&P 500 was at its lowest level and fear was running high, VXX spiked to a high of nearly $45.00. Since then, VXX has fallen more than 30% to around $28.00.
Needless to say, investing in VXX when fear was running high didn’t pay off.
Market Vectors Junior Gold Miners ETF (GDXJ)
GDXJ’s bad year just got worse. The ETF is down a whopping 22% over the last four weeks and it’s a now 45% below the 52-week high.
This ETF holds small- and mid-cap companies that generate at least 50% of their revenue from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.
Obviously the price of gold and silver plays a vital role for these companies.
Unfortunately, the price of these precious metals has been dropping like a rock. That’s bad news for the small companies in GDXJ.
What’s more, the future for this safe haven isn’t good. A stronger US Dollar, economic optimism, and rising interest rates will continue to push the price lower.
Barclays iPath Dow Jones UBS Coffee ETN (JO)
JO’s the second exchange traded product from iPath to finds its way onto this list… and that’s not a good thing. This ETF is designed to track the value of one futures contract on the commodity of coffee.
Over the last four weeks, JO’s down nearly 20%. Even though JO is down over the last four weeks, it is still up nearly 60% so far this year.
The majority of the surge in coffee prices happened earlier this year on supply concerns. Since then, coffee futures have been contained in volatile range bound trading.
Right now the two things moving coffee futures are the US Dollar and tight supplies. These two forces are moving in opposite directions…
The strong US Dollar is hurting the value of coffee futures. But tight supplies due to crop damage are helping support prices.
It seems likely that uncertainty about the extent of crop damage in remote regions and currency volatility will lead to more volatility for coffee prices and JO.
Here’s the upshot…
The recent drop in value by JO, GDXJ, and VXX has been shocking for anyone who invested in these products four weeks ago. Needless to say, it’s important to understand the risks of investing in these products before buying.
Good Investing,
Corey Williams
Category: ETFs, Sector ETFs
