After a strong run in November and December, the month of January saw the S&P decline 1.1%. The move may spark some debate about the ‘January Indicator’ or ‘January Barometer’ which postulates that, what happens in January, is a good indicator for markets for the rest of the year. We would be careful reading too much into this axiom. Anyone who listened to this in 2016 would have missed out on an 18% market rally. In 2020, we saw January kick off with selling, and the barometer certainly looked prescient after an explosion of coronavirus cases led to an economic halt and steep declines in March. Markets, thanks largely to the Fed, saw a strong liquidity-fueled bounce back and enjoyed a banner year.
The S&P was not the only index that saw weakness as the Dow was also down in January, falling -2.04%. We did see a rally in the Nasdaq and Russell. The tech sector rallied +1.42%, while the Small Cap Russell was a notable outperformer, rising 5%. Overall, a mixed bag of results for the markets. It would appear that the market is in the midst of a sideways consolidation as participants digest news around a vaccine rollout and the fiscal policy debates.
Against this backdrop, we wanted to take a look at some of the search trends by Financial Advisors in the month of January. This is a breakdown of the Top ETF searches by Financial Advisors over the past five weeks. Search trends suggest Financial Advisors are doing their due diligence and shopping around different industries looking for the ‘Next Big Thing’. A break down of these trends may help us follow where rotation is headed.
The most commonly searched ETF in the Financial Advisor universe remains the SPDR S&P 500 (SPY). This is not particularly surprising as the S&P is the most widely followed index. The Invesco QQQ Trust (QQQ) generally runs second. The third most searched ETF may come as a surprise as that distinction falls to the VanEck Gold Miners (GDX) outpaces searches on the SPDR Gold Trust (GLD) #8 on the list. Cathie Woods’ Ark Innovation (ARKK) and Ark Genomic Revolution (ARKG) occupy the #4 and #5 spots as Ms. Woods’ impressive track record in 2020 and her active investment philosophy has garnered her a strong following. News that ARK filed to launch a Space Exploration ETF under the ticker ARKX was a top story on January 14.
The top 5 in the ETF searches are hardly surprising. The next level of ETF searches is where we started to see more diversity. The The ProShares Ultra VIX Short-term Futures (UVXY) was #6 on our list as participants prepared for pick up in volatility. Two metal plays came in at #7 and #8 as the iShare Silver Trust (SLV) and the GLD were popular searches by your peers. The SLV is holding particular interest these days as it was a focus of the retail crowd earlier this week. FAs had this ETF on their radar for weeks which helps lend credence to the recent breakout as something more than a populist stock movement.
Rounding out the top 10 are two themes playing out in the rotation trade. At #9 was the SPDR Energy Select (XLE) which is up 10% in January and the iShares Russell (IWM). The search activity is trending with price action as long-term investors are seeing the value in energy plays and the idea that Small Caps will play catch up to the large cap names that have dominated market activity for the past three years.
The clean energy space has seen plenty of interest but there is a rotation in the ETFs that Financial Advisors are researching. Our take is that FAs are looking for precise ways to play the clean tech boom or looking for hidden gems that have not run up aggressively and present more upside. The Invesco Solar ETF (TAN) remains the top searched clean energy ETF. A few other ETFs in search activity include the Invesco WilderHill Clean Energy (PBW) which has a highly diversified portfolio of wind, solar, biofuel and geothermal plays; the iShare Global Clean Energy (ICLN) which tracks clean energy plays as well as the companies that develop the technology and equipment used in the process; Invesco Water Resources (PHO) which is U.S.-focused and the most popular water-themed fund on the market; and the Global X Lithium and Battery (LIT) which tracks a global index of 20-40 companies that are involved in the global mining and exploration of lithium or involved in lithium battery production.
The other notable themes we saw were searches into the First Trust AI and Robotics (ROBT) which selects companies involved in the AI and robotics space as the name would suggest. This covers companies in machinery, semiconductors, machine learning, and software. ROBT also provides a global flavor as the United States is only 56% of the portfolio basket. We were intrigued to find that Blackberry (BB) was the largest holding in this ETF. The Global X Internet of Things (SNSR) is another hot search topic as this provides exposure to developed market companies in the Internet of Things. This is another ETF with substantial foreign exposure with the U.S. making up 63% of the portfolio.
Advisors in Focus will continue to look at larger time frames of search activity to detect underlying economic trends supported by research activity. We will track the January performers and continue to compile searches to identify the vehicles that can provide returns FAs need to drive AUM higher.