It's been a stellar year for investment markets. There have been winners everywhere you look and all you really needed to do was stay invested. The problem with years like that are that valuations get stretched and we cant expect the same sort of returns this year. So where do we find this years winners, maybe by looking at those ETF's and sectors that have underperformed in the past 6-12 months.
Here is a list of the 20 worst performing ETF's over the past 6 months listed on the ASX. I have filtered out fixed income, short funds, geared funds, new funds, currency funds. I have also filtered out those funds that have returned more than 25% for the full year. They cant really be said to be underperformers.
There appear to be a couple of big themes here; Asia, Emerging Markets (maybe thats one theme), Metals and Resources (one theme) and then there are some interesting outliers such as the CURE Biotech fund.
The emerging markets underperformance may stem from a view that China has increased the regulatory scrutiny of its tech giants and that Wall street is less likely to finance Chinese tech. And yet the Chinese economy remains the biggest growth story in the world today and companies like Alibaba and Baidu continue to thrive. In the chart below the light blue line is IZZ the China 50 ETF.
The Resources sector has been a victim of one of the biggest switches from growth to value stocks ever seen. Value stocks have underperformed for many years but they they saw a great deal of flows over the last 12 months perhaps as a reaction to the enormous PE's on which the FAANG stocks were trading. The other factor here has been the gold price, very fashionable early in the pandemic gold has lost its lustre somewhat. In the chart below the yellow line is MNRS the gold miners ETF.
It is worth noting that both Emerging Markets and Resources are sectors that economists suggest may perform better in an inflationary environment.
Biotech is another sector that has underperformed. CURE stands out as the worst performer on the list. Healthcare on the other hand has done well. In the chart below CURE is plotted against the Healthcare ETF's.
So if we have to pick a few underperformers to give us a kick along in the next 12 months here we go. Not recommendations as I have not and cannot know your personal circumstances.
CURE - this is the S&P US Biotech index with 197 stocks, I think it is unlikely to continue to under perform.
VAE or IZZ- Asia ex Japan ETF or the China large Cap, exposure to a reweighting of the China story.
MVR - Australian resources exposure.
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