The ETF Portfolio Strategist: 10 Feb 2021
Trend Watch
In this issue:
iShares MSCI Turkey (TUR) takes flight
US Natural Gas (UNG) – the downside exception to the commodities rally
Invesco Solar (TAN) continues to run hot
Programming note: Here begins a periodic update of ETFs that caught your editor’s eye on the trending front. In contrast to our broad-based portfolio strategy edition (see here, for instance), Trend Watch will go granular and tactical. In this space we’ll selectively highlight funds that, for one reason or another, stand out vis-à-vis a wide-ranging list of 146 ETFs that run the gamut, from various measures of US stocks and bonds to commodities, REITs, forex, foreign fixed income, country funds and narrowly defined industry groups. For a complete list of the funds we’re monitoring, see the list below.
Let’s’ start with iShares MSCI Turkey (TUR), which until last November had been hammered. No surprise, given the various economic and geopolitical risks that weighed on the country (and still do). But after diving sharply last November (again), the fund has rocketed higher recently. Bloomberg yesterday reported that the country is “signaling that it could give ground on the Russian missiles it’s poised to deploy if the U.S. severs support for Kurdish forces Ankara views as a mortal threat.” Is Ankara willing to negotiate now that a new administration is in the White House? While we’re asking questions: Has the market been pricing in a thaw in US-Turkey relations in recent months?
Commodities overall have been on a tear recently, which is why US Natural Gas (UNG) stands out as a bearish exception. The fund remains in a long-run downtrend and not even a strong rebound in crude oil prices has affected UNG, which continues to show a strong downside bias. The fund has had its short-lived rallies over the years, but UNG has been a (mostly) losing proposition since its launch in 2007. Recent history suggests more of the same is on tap for the near term. All the more so when you consider that warmer weather is approaching — not a great setup for a commodity that relies to a large extent on winter heating demand. To be fair (to natural gas prices), the underlying commodity has bounced sharply since last summer, but the rally is only weakly reflected in UNG. Not an encouraging sign for the ETF.
Alternative energy stocks are hot and among the equities burning brightest is this niche is the solar industry. Indeed, Invesco Solar (TAN) has delivered one of the strongest and most-stable rebounds from last year’s coronavirus crash of any slice of the equities market. Skeptics have been asking how much longer the rally can run? But they’ve been asking that for months and at the moment there’s no sign that this light is about to burn out.
