Like the best-performing Exchange Traded Funds of 2022, the worst-performing ETFs of the year were all leveraged.
It is no surprise that leveraged ETFs would be the best and worst-performing ETFs each year. But, interestingly, three of the top first worst performing ETFs were leveraged funds that are bullish big technology stocks, and the other two were ETFs that are short oil & gas companies.
2022 was a year we saw many divergences occur compared to the past almost ten years.
The technology-heavy index, the NASDAQ, was the worst-performing major index, while the slow and sleepy Dow Jones Industrial Average, while still down, was the best performer. The Dow Jones Industrial Average fell 8.8% as the S&P 500 dropped 19.4%, and the NASDAQ sank 33.1%.
Let's look at which ETFs finished in the top five worst performers of 2022.
The worst performing Exchange Traded Fund of 2022 was the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) which ended the year down 88.62%. KOLD provides two times short exposure to an index that tracks natural gas by holding second-month futures contracts.
In 2022 the price of natural gas went through the roof as Russia invaded Ukraine. That invasion led to almost all of Europe imposing a ban on Russian oil and gas, which led to price increases for any other country that also banned the importation of Russian oil and gas.
While KOLD was the worst-performing ETF, the ProShares UltraShort Oil & Gas ETF (DUG) was the fourth worst ETF of 2022 after dropping 72.99%. DUG offers investors two times short exposure to a market-cap-weighted index of large US oil and gas companies.
Since Russia is one of the largest oil and gas producers in the world, the bans on buying their products sent the price of both oil and gas higher in 2022. Thus oil and gas companies based in the United States benefited, and DUG rose substantially.
But, most experts claim the Russian-Ukranie conflict was not the only reason we saw oil and gas prices climb. Some of the increase was likely due to increased demand as most of the world came out of Covid-19 restrictions, and more people felt comfortable traveling. Continue reading "Worst Performing ETFs in 2022"