The year 2013 was rock solid for the global equity market and the ETFs world thanks to investor appetite for riskier assets, Fed easy money policies, solid earnings growth and improving global economies conditions.
A healing job market, recovery in the housing market and robust retail sales are boosting growth in the largest world economy. In addition, the Fed decided to keep its interest rates at lower levels for sometime despite its plan to curtail the pace of the ongoing stimulus starting in January. This suggests increased confidence in the U.S. economy’s growth rate and job scenario as well as a bullish outlook for 2014.
Further, the two-year bipartisan budget deal eases spending cuts and political dysfunction, and erases the prospect of another shutdown, which was looming large across the global economy. All these positive news flows have propelled the equity market higher. The MSCI World Index as well as the major U.S. benchmarks – Dow and the S&P 500 – gained over 20% this year.
While there have been winners in every corner of the space delivering smart returns in 2013, some of the sector/country ETFs are still lagging. These funds plunged in double digits, suggesting some more downside ahead in 2014 (read: 3 Hot Sector ETFs for 2014).
Metal Mining ETFs
The worst performer of 2013 globally is definitely the mining world, in particular gold and silver miners. Due to plunging metal prices and unfavorable market conditions, miners faced a rough year. Acting as leveraged plays on underlying metal prices, metal miners tend to experience bigger losses than their bullion cousins when there is a slump in the metal market.
Though there are several ETFs that were badly hit from these trends, two funds –Global X Gold Explorers ETF (NYSEARCA:GLDX) and Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) – have seen terrible performances in the metal mining ETF world. Both lost more than 61% of their value.
Out of the two, GDXJ is more popular with AUM of $1.1 billion and is cheaper than GLDX by 10 bps. The fund provides exposure to 50 stocks by tracking the Market Vectors Global Junior Gold Miners Index. Canadian firms take the top spot at 60.3%, though Australia (20.3%) and the U.S. (9.8%) round out the top three.
On the other hand, GLDX tracks the Solactive Global Gold Explorers Index and holds a small basket of 19 gold mining firms across the globe. Here also, Canadian firms dominate the fund’s return with 85% of total assets while Australia, U.S., and United Kingdom companies take the remainder.