The Israel-Gaza war grabbed all attention last week. Israel declared war on Hamas after the Palestinian militant group staged a surprise attack over the last-to-last weekend. The S&P 500 (up 0.5%), the Dow Jones (up 0.8%), and the Nasdaq (down 0.2%) advanced by a slight margin while the Russell 2000 (down 1.5%) slumped. Volatility product iPath Series B S&P 500 VIX Short-Term Futures ETN VXX surged 12% on the final day of last week as a spike in inflation data bolstered the bets over one more Fed rate hike this year.
The consumer price index increased 0.4% sequentially and 3.7% year over year in September, according to a Bureau of Labor Statistics report. Dow Jones estimates were 0.3% and 3.6%, respectively. The core inflation number, barring food and energy prices, matched with economists’ expectations at an increase of 0.3% on the month and 4.1% on a year-over-year basis. The data follows a stronger-than-expected producer price index reading for September (read: 4 Sector ETFs to Win on Sticky Inflation).
Against this backdrop, below we highlight a few winning ETFs of the last week.
Gold Miners
iShares MSCI Global Gold Miners ETF RING – Up 5.6%
Gold is often viewed as a hedge against market risk. In times of geopolitical tension, it is normal to seek a flight to safety, which is why we have been seeing the demand for gold bullion going up. The Middle East crisis, in tun, dragged down the benchmark U.S. treasury bond yields as the demand for U.S. treasuries rose because this is too is seen as a market risk hedge (read: Time to Buy Leveraged Gold ETFs on Safe-Haven Bid?).
Aerospace & Defense
Global X Defense Tech ETF SHLD – Up 8.3%
Shares of defense companies amid the fighting in Israel and Gaza. The assault included rockets, infiltrations, and the capture of soldiers, exacerbating tensions. Due to this war-like situation, shares of arms makers — including Northrop Gruman Corp, L3Harris Technologies Inc., Huntington Ingalls Industries Inc., Lockheed Martin Corp. and General Dynamics Corp – surged lately (read: Defense ETFs Spike on Middle East Tensions).
Energy
United States Brent Oil Fund LP BNO – Up 7.8%
The Middle East is a key player in the global oil exploration market, making up more than 30% of the world's oil production. Any instability in the region has the potential to disrupt oil supplies and send ripples through the global economy.
Despite no immediate oil supply disruptions, market watchers like Andy Lipow, the president of Lipow Oil Associates, warn that the initial oil market reaction is driven by fears of the conflict spreading to other regions like Iran, per a Yahoo Finance article. Iran – is both a key oil producer and a supporter of Hamas. As a result, energy ETFs surged last week (read: Oil Soars On Israel-Hamas Conflict: Sector ETFs to Gain/Lose).
Volatility
iPath Series B S&P 500 VIX Short-Term Futures ETN VXX – Up 7.1%
Last week was roiled by geopolitical concerns and worries over the Fed’s next actions. This, in turn, caused volatilities in the market.
Government Bond ETF
iShares 25+ Year Treasury STRIPS Bond ETF GOVZ – Up 5.8%
Benchmark U.S. Treasury yields were largely subdued last week. It started the week at 4.78%, hit a weekly low of 4.58% and closed the week at 4.63%. As interest rates dived, bond ETFs gained. The underlying ICE BofA Long US Treasury Principal STRIPS Index comprises of the principal payments of U.S. Treasury bonds with remaining maturities of at least 25 years. The fund charges 10 bps in fees and yields 4.60% annually.
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Get it free >>Global X Defense Tech ETF (SHLD): ETF Research Reports
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX): ETF Research Reports
United States Brent Oil ETF (BNO): ETF Research Reports
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
iShares 25+ Year Treasury STRIPS Bond ETF (GOVZ): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
