Sumit Roy
·6 min read
It’s still early, but 2023 is shaping up to be nothing like 2022. Unlike last year, when stocks entered the year near record highs and then proceeded to grind continuously lower, 2023 has been quite a bit different.
The S&P 500 started 2023 nearly 20% below its highs, while the Nasdaq-100 was at bear market lows, down around 35% from its peak.
Growth was out of favor, while value stocks were in.
That all changed once the calendar flipped into the new year. Suddenly, tech stocks and growth stocks started outperforming again, helping to push the broader market higher as well.
The Invesco QQQ Trust (QQQ) jumped nearly 19% during the first quarter, while the S&P 500 gained 6%.
The most beaten-down segments of the markets led the way in 1Q as investors sought bargains and looked more favorably upon growth stocks amid a decline in long-term interest rates.
Crypto ETFs Dominate
No group benefited most from the shift back toward growth stocks in 2023 than crypto ETFs. A full 18 of the 20 best-performing ETFs of the year (excluding leveraged and inverse funds) were related to the crypto industry.
That includes the Valkyrie Bitcoin Miners ETF (WGMI), the ProShares Bitcoin Strategy ETF (BITO) and the Bitwise Crypto Industry Innovators ETF (BITQ), each with gains of more than 65%.
These same ETFs were down by more than 65% in 2022, so even after their stunning first-quarter gains, prices for the funds are only back to where they were trading late last year.
Still, these returns are nothing to sneeze at and they come despite a regulatory crackdown on the crypto industry by the SEC and the CFTC.
Overshadowing that crackdown has been a steep rebound in cryptocurrency prices. Bitcoin is up 70% this year and is close to doubling from its low of $15,000 set in November.
FANGs Make a Comeback
Though crypto ETFs dominate the first quarter’s best-performers list, a couple of other ETFs managed to sneak into the top 20.
That includes the MicroSectors FANG+ ETNs (FNGS) and the Yieldmax Tsla Option Income ETF (TSLY).
Megacap tech stocks have made a comeback this year, boosting returns of FNGS, which holds big positions in Nvidia, Netflix, AMD, Tesla and Microsoft.
Meanwhile, TSLY has taken advantage of the enormous volatility in Tesla shares by writing covered calls on the stock. The fund has gained more than 36% this year.
Outside of the top 20 ETFs that we highlight in the table at the bottom of this story, other winners this year include the ARK Next Generation Internet ETF (ARKW), up 33%; the Meet Kevin Pricing Power ETF (PP), up 30%; the Roundhill Ball Metaverse ETF (METV), up 29%; and the Roundhill Meme ETF (MEME), up 26%.
Value Stocks Pull Back
As growth stocks have come back into favor in 2023, investors have lost some of their enthusiasm for value stocks.
Perhaps the best example of this is the energy sector, which is down by 1% as measured by the Energy Select Sector SPDR Fund (XLE). Last year, energy was the best-performing sector within the stock market, with a 64% gain.
The financial sector is another group that’s lost its luster in 2023, no thanks to the banking crisis that erupted in March following the collapse of Silicon Valley Bank.
The SPDR S&P Regional Banking ETF (KRE) lost a quarter of its value this year, making it the sixth-worst-performing ETF of the year.
But no ETF has done worse than the Noble Absolute Return ETF (NOPE). This hedge-fund-in-an-ETF made some ill-timed bets against Tesla, gold and bitcoin late last year, leading to a whopping 62% loss for the fund so far in 2023.
The actively managed ETF recently shifted gears to go long the Nasdaq and gold miners.
Meanwhile, the United States Natural Gas Fund (UNG) was more than cut in half during the first quarter as natural gas prices plummeted due to a warm winter in the U.S. and rising production of the fuel.
Cannabis ETFs also fared poorly during Q1, with losses of around 20% for funds like the Roundhill Cannabis ETF (WEED) and the ETFMG US Alternative Harvest ETF (MJUS).
For a full list of this year’s 20 best- and worst-performing ETFs, see the tables below:
Best-Performing ETFs of the Year (ex-leveraged/inverse)
Fund | Ticker | YTD Return |
+98.21% | ||
+80.42% | ||
+69.04% | ||
+68.03% | ||
+67.51% | ||
+67.43% | ||
+66.57% | ||
+66.35% | ||
+65.78% | ||
+65.06% | ||
+64.96% | ||
+60.67% | ||
+58.70% | ||
+44.88% | ||
First Trust SkyBridge Crypto Industry and Digital Economy ETF | +43.43% | |
+37.74% | ||
+36.55% | ||
+35.82% | ||
+35.49% | ||
Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF | +35.04% |
Source: Bloomberg. Data measures total returns for the year-to-date period through March 30.
Worst-Performing ETFs of the Year (ex-leveraged/inverse)
Fund | Ticker | YTD Return |
-62.35% | ||
-52.62% | ||
iPath Series B Bloomberg Natural Gas Subindex Total Return ETN | -52.58% | |
-39.96% | ||
-34.36% | ||
-25.45% | ||
-25.04% | ||
-22.65% | ||
-21.41% | ||
-20.92% | ||
-20.65% | ||
-20.40% | ||
-20.21% | ||
-20.13% | ||
-19.23% | ||
-19.15% | ||
-19.10% | ||
-19.09% | ||
-18.69% | ||
-18.60% |
Source: Bloomberg. Data measures total returns for the year-to-date period through March 30
Email Sumit Roy at sumit.roy@etf.com or follow him on Twitter @ sumitroy2
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