Stock ETFs Take Worst Monthly Loss in Over a Year

August 30, 2013

NEW YORK (Aug 30)  The broad equities market and stock exchange traded funds hit record highs at the start of August. However, after a series of sell-offs, notably in the last week of the month due to the escalating Syria crisis, the markets extended the worst monthly drop since May 2012.

The Dow Jones Industrial Average was down 4.0% over August. Meanwhile, the Nasdaq Composite was 0.6% higher and the S&P 500 dipped 2.6%.

The top non-leveraged ETFs over August include PowerShares DB Silver Fund (DBS) up 22.0%, E-Tracs UBS Bloomberg CMCI Silver ETN (USV) up 21.1% and iShares Silver Trust (SLV) up 20.9%. [Silver ETF’s 20% August Rally Beats Gold]

Bullish silver futures speculators helped boost previously downtrodden silver ETFs.

In the last week of the month, bellicose rhetoric in response to alleged chemical weapons deployment in Syria spurred safe-haven demand for silver. Moreover, precious metals futures rose on renewed fears that the U.S. would hit its debt ceiling sooner-than-expected.

Increased industrial demand could support silver. Jewelry and ETFs account for a substantial portion of global silver demand every year, but by some estimates, industrial use is 50% of annual silver demand.

The worst performing non-leveraged ETFs for the month include the Market Vectors Indonesia Small-Cap ETF (IDXJ) down 23.1%, iShares MSCI Indonesia ETF (EIDO) down 22.4% and Market Vectors Indonesia ETF (IDX) down 20.6%. [Indonesia ETFs Lead Global Sell-Off]

Emerging market stocks have been weakening in anticipation to an end to easy money.

Indonesian stocks are also floundering as the country sees a widening current-account deficit. The country is importing more than it exports – through imports, a country has to purchase goods using the foreign currency, which strengthens that foreign currency against the domestic currency.

The equities market and stock ETFs were off to a great start at the beginning of the month. The S&P 500 closed at record high of 1,709.67 and the Dow hit 15,658.38 on August 2. However, it was all downhill from there.

With the improving markets and employment data, more investors are becoming more concerned about the Fed tapering its bond purchasing program sooner rather than later. Consequently, stocks began to drift lower as investors began to take profits off the highs in listless trading through mid-August.

Stocks were upended in the last week of August after U.S. Secretary of State John Kerry held Syria’s government responsible for chemical attacks against its population. While evidence against Syria may not be absolutely conclusive, the U.S., along with France, are open to a military response, arguing that a strike is justified based on humanitarian grounds.

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