Speculative Growth ETFs Make a Comeback in 1Q

They were among the best-performing funds of the first quarter.

sumit
|
Senior ETF Analyst
|
Reviewed by: Sumit Roy
,
Edited by: Sumit Roy

It’s a stretch to say they’re back in favor, but some of the most speculative, volatile pockets of the market that crashed and burned in 2022 have put up impressive returns during the first quarter of 2023. 

The Roundhill MEME ETF (MEME) is up 27% since the start of the year. The ARK Innovation ETF (ARKK) is up by 23%. The Valkyrie Bitcoin Miners ETF (WGMI) is up by 96%. And the Roundhill Ball Metaverse ETF (METV) is up by 27%.  

 


 

YTD Returns  

All of those ETFs were pummeled in 2022, with losses ranging from 50% to 85%, so even this year’s solid advances only put those funds back to where they were trading late last year. Still, gains are gains, and it raises the question of whether growth, or even speculative growth, might continue to thrive this year. 

Though nothing is impossible, it’s hard to imagine that the excesses of 2020 and 2021 will return anytime soon. But even a more modest upswing could result in solid returns for investors, as this year’s first quarter results show.  

A More Favorable Rate Environment  

A key reason for the resurgence of speculative growth stocks this year is the decline in long-term interest rates. The Fed raised its benchmark federal funds rate to nearly 5% earlier this month, but the 10-year Treasury bond yield briefly dipped to 3.37% last week, matching its low for the year set in January. 

 

 

If rates continue to decline—perhaps because inflation comes down or because the economy weakens—that could increase the appeal of growth stocks, supporting some of the previously mentioned ETFs. 

On the other hand, after being burned so badly in 2022, investors will likely be more discerning when it comes to which growth ETFs and growth stocks they invest in. 

Even in a more benign interest rate environment, not all growth stocks will necessarily thrive. Once the easy gains are exhausted, we could see more differentiation between the performance of these ETFs. 

Meme stocks, which were a 2020-2021 bubble phenomenon, might perform worse than metaverse stocks, a category that includes big, profitable tech companies.  

 


Source: ETF Comparison tool 
 

Email Sumit Roy at [email protected] or follow him on Twitter @ sumitroy       

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.