Commodities are back - well, sort of. The prices of most major classes of commodities still sit well below their 2008 highs, but they have rebounded enough to form a common theme among the top-performing ETFs from the first-half of 2009. ETFs with commodity exposure are up big time this year. Here are five of the best performing ETFs as Q2 comes to a close. (For an indepth look at ETFs, check out our Investopedia Special Feature: Exchange Traded Funds.)
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High Octane Returns
Few motorists would be surprised to learn that the United States Gasoline Fund (NYSE:UGA) has been the top-performing ETF so far this year, for non-leveraged ETFs tracked by Morningstar. The fund, which is designed to track the price of unleaded gasoline, is up 65% year-to-date. Despite this strong run-up in 2009, UGA is still down a good 53.0% from its momentous highs of last summer.
On Monday, the price of a gallon of gas fell to $2.69. The downward move was the first decline for gasoline in the past 54 days. It was also a welcomed break for motorists after gasoline prices spiked $0.28 over the past month. For investors, this ETF may prove to be volatile in the second-half of 2009 as a large degree of uncertainty surrounding the health of the economy hangs over head.
Siberian High
In 2008, Russia's RTS index experienced a woeful downturn losing approximately 70% of its value. 2009 has been a completely different story so far. Russian stocks have bounced back this year as evidenced by the Market Vectors Russia ETF (NYSE: RSX) which has risen 60% in 2009. The fund is more than 60% weighted in commodities. This exposure hammers home the notion that the future state of the Russian economy will be heavily reliant upon the fate of prices of natural resources.
Another ETF that has made a strong comeback this year has been the Market Vectors Coal ETF (NYSE:KOL). The fund was down 62.7% in 2008, but has bounced back to the tune of 52% so far this year. Despite the push for cleaner energy alternatives, this ETF still might fare okay over the long-term. The Environmental Protection Agency is projecting that even under President Obama's plan to fight climate change, the U.S. will use more coal in 2020 than in 2005.
International Appeal
ETFs with exposure to South American economies have torn the cover off of the ball so far this year. The iShares MSCI Chile Investable Market Index (NYSE:ECH) has soared 50% in the first-half of 2009. Last month, the country's central bank cut its benchmark interest rate to a historic low. Banco Central de Chile offered up an outlook that was more optimistic than expected, but noted that it could make further interest rate cuts if economic conditions worsen.
Another market located south of the equator that has been faring particularly well in 2009 has been Brazil. The iShares MSCI Brazil Index Fund (NYSE:EWZ) is up 49% year-to-date. Petrobras (NYSE:PBR), the largest component of EWZ, has had a particularly stellar beginning of 2009, as its shares have climbed 63%. The oil producer has benefited from the recent upswing in crude prices and is coming off of a Q1 in which it topped analysts' expectations.
The Bottom Line
The majority of the top performing ETFs from the first-half of the year have been linked to commodities. Whether in the form of a fund that directly tracks the price of an underlying commodity or a country-focused ETF with significant exposure to natural resources, commodities have been a driving force. There are some indications that this theme is beginning to crack, so it will be interesting to check in with these plays at year end to see how they ultimately pan out. (To learn more, read An Inside Look At ETF Construction.)
