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  • Thematic Investing

    Market Internals Continue to Churn as Pressure Mounts on Technology and Growth-Oriented Thematic Equities

    VanEck
    May 21, 2021
     

    The performance of U.S. equities was largely unchanged since the April 2021 BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) rebalance. The performance of the S&P 500 Index masked a dramatic and accelerating shift away from technology and growth-oriented equities which fueled much of its gains during 2020. Global cases of COVID-19 reached new highs, as developing countries including India and Brazil struggled to contain mass outbreaks of new variants. Western and developed nations fared much better and have largely stabilized case growth, amidst widespread vaccination efforts which have left many countries with over 50% of the adult population having received at least one vaccine dose. Within the United States, the outcome of broad economic re-opening was apparent in the April readings in new jobs, retail sales and new housing starts.

    Thematic Growth-Oriented Stocks Weigh on Performance

    The rotation away from thematic growth-oriented stocks weighed on performance over the past month. The dynamic, sector agnostic approach of the BUZZ Index insulated against further weakness as value-oriented holdings featured within the Index, continued to outperform. The top contributors to performance were primarily within the health care and materials sectors and included many recognizable ‘old economy’ stocks such as United States Steel Corp (NYSE: X), Pfizer (NYSE: PFE), Barrick Gold Corp (NYSE: GOLD), Cleveland Cliffs (NYSE: CLF), AT&T Inc. (NYSE: T) and Exxon Mobil Corp (NYSE: XOM).

    Top Contributors: April 8, 2021 – May 13, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Moderna Inc MRNA 1.43 0.18
    NVIDIA Corp NVDA 1.48 0.18
    United States Steel Corp X 1.01 0.17
    Pfizer Inc PFE 1.32 0.16
    GameStop Corp GME 2.35 0.15
    Barrick Gold Corp GOLD 1.3 0.15
    Goldman Sachs Group Inc GS 1.43 0.1
    Cleveland-Cliffs Inc CLF 1.11 0.1
    AT&T Inc T 1.06 0.07
    Exxon Mobil Corp XOM 1.06 0.07

    Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

    The top detractors to performance featured many high growth ‘market darling’ stocks whose share price meaningfully appreciated over the past year. Specifically, shares of consumer discretionary and information technology stocks led declines together with thematic growth equities within the industrial sector. Once high-flying stocks such as Virgin Galactic Holdings (NYSE: SPCE), Plug Power Inc. (NASD: PLUG) and leading electric vehicle manufacturer Tesla Inc. (NASD: TSLA) were among the top detractors from performance within the BUZZ Index in the period following the April 2021 Index rebalance.

    Bottom Contributors: April 8, 2021 – May 13, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Virgin Galactic Holdings Inc SPCE 1.56 -0.98
    DraftKings Inc DKNG 2.74 -0.97
    Rocket Cos Inc RKT 2.34 -0.83
    Plug Power Inc PLUG 2.35 -0.77
    Novavax Inc NVAX 2.75 -0.77
    Penn National Gaming Inc PENN 1.99 -0.65
    Palantir Technologies Inc PLTR 2.34 -0.61
    Tesla Inc TSLA 3.14 -0.51
    Twitter Inc TWTR 1.59 -0.43
    Square Inc SQ 1.99 -0.39

    Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

    Sentiment Stock Highlight: Nvidia Corp

    Nvidia Corp (NASD: NVDA) proved noteworthy during the latest period following the April 2021 Index rebalance. Despite declining 4.5% during the period between Index section dates, NVDA still contributed positively to performance. NVDA’s weight within the Index was targeted to drop from a top weight to just a 1% weighting within the BUZZ Index, its lowest weight within the Index since April 2020. The stock proceeded to rally 12.7% in the period between selection date and rebalance date, peaking at $645.49 per share on the date its weight was reduced within the Index to 1%. Sentiment strengthened as the stock proceeded to fall from its all-time high as investors saw value in the newly discounted shares. NVDA’s weight within the BUZZ Index as of the May 2021 selection date is targeted to increase to 1.85%.

    Nvidia Stock Price: January 1, 2020 - May 14, 2021

    Top Contributors, Bottom Contributors, Nvidia Stock Price

    Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

    BUZZ Index May 2021 Rebalance Highlights

    Spotify

    Growth-oriented equities have dropped sharply amid renewed fears of inflation and rising interest rates. The technology-heavy Nasdaq has experienced four straight weeks of losses, and the S&P 500 Index, which had been outperforming over the past few months, has fallen from recent all-time highs. Despite these macro factors, rebalancing activity this month within the BUZZ Index remained muted as the recent events in the markets did little to change investor sentiment on the many of the currently featured stocks within the BUZZ Index. The largest addition to the Index this month was music streaming giant Spotify (NYSE: SPOT), a stock that first entered the Index in June 2020. At the time, SPOT had just begun to break out to a new all-time high and went on to almost double by the end of the year. However, since December 2020, sentiment on SPOT has waned and the stock was no longer featured within the BUZZ the Index. With the rotation trade out of technology stocks in recent months, SPOT has been hit hard, falling almost 35% year to date. Sentiment on SPOT turned sharply positive this month as the stock approached last year's breakout level, suggesting value investors are stepping in and indicating now, may be the time to ‘buy the dip’.

    Etsy

    Another new addition to the BUZZ Index this month was Etsy (NASDAQ: ETSY). ETSY, the e-commerce platform for curated and custom-designed items, had made its name by offering a unique marketplace for handmade and vintage items not typically available for purchase on Amazon (NASDAQ: AMZN) or at traditional major retailers. Last March, when it became evident that Covid would be digitally transforming the world, online platforms such as Etsy took off. After reaching a low of $30 per share in March 2020, ETSY proceeded to rally eight-fold, reaching over $240 per share earlier this year. However, this month alone, the stock is down almost 22%, after an earnings and outlook miss caused the stock to gap down sharply. Investor sentiment on the once high-flying internet stock turned notably positive amidst the sell-off. In another ‘buy the dip’ moment, investor sentiment served to reflect the broad investor community’s conviction that the stock has fallen too far and currently represents good value. ETSY was removed from the BUZZ Index near its highs during the April 2021 rebalance and after a brief hiatus from the Index, ETSY returns this month with a 0.58% weight.

    For more on the BUZZ Index rebalance results, view the BUZZ Index reconstitution report.

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