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Despite inflationary concerns weighing down on consumption outlook in the Western Hemisphere, the S&P 500 (ticker: SPX) has been rising throughout the course of the Year Till Date (YTD). However, this tide doesn’t necessary raise all boats in quite the same way: “tech” has been attracting a preponderance of investor attention. Furthermore, tech stocks have the largest collective weight among the different types of companies. How these two fact patterns are affecting the index becomes all the more evident when considering the S&P 500 Ex-Information Technology & Communication Services (ticker: SPXXTTSP) – which excludes the two sectors where most “tech” stocks reside – and the S&P 500 Top 50 (ticker: SP5T5) – which simply considers the top 50 stocks in the index.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Leverage Shares analysis
When divested of most “tech” stocks, the remaining constituents of the S&P 500 underperform relative to broad market. Concurrently, the tech-heavy Top 50 of the S&P 500 significantly outperforms the broad market.
This implies that purchasing the leading constituents of the broad market is a better proposition than the broad market. However, there is a matter of diversification. Instead of equities, commodities have provided an edge via market-beating behaviour in the year. To indicate this, there are four fully-collateralised UCITS-eligible Exchange-Traded Commodities (ETC) that European investors can tap into:
The Copper ETC (CULS) which provides a passive total return exposure to U.S.-listed copper futures;
The Natural Gas ETC (NGLS) which provides a passive, total return exposure to front-month Natural Gas futures traded on NYMEX;
The Brent Oil ETC (1BRN) which provides a passive, total return exposure to front-month Brent Crude Oil futures traded on ICE
The WTI Oil ETC (WTI) which provides a passive, total return exposure to front-month WTI Crude Oil futures traded on NYMEX
When considered against the Top 50 of the broad market as well as the bulk of the market minus “tech”, there are some clear outperformers in the commodities space.
Source: Leverage Shares analysis
As of the 5th of April, Copper outperforms the “ex-tech” market by nearly 2.5% while both Brent and WTI delivered more than 11% in excess returns over the Top 50 constituents of the market. A “warmer than usual” winter in the Northern Hemisphere generally helped tamp down gas prices while inventory levels stayed high. However, there have been a number of periods in the YTD wherein holding Natural Gas on a tactical basis would have yielded substantially higher returns than holding the market in any of the iterations shown.
On an overall basis, the Oil ETCs have shown the most consistent level of performance. This is largely attributable to the fact that OPEC+ oil producers have maintained supply cuts until June (at least) while robust consumption in India, Europe and China pushes up demand. While an oil play seems to have a substantial use case, there is another factor that could be used in the selection of which instrument to use. For instance, if Brent Futures contracts listed in London (LCOM4) were to be compared to the continually-rolled Oil ETCs 1BRN and WTI, the latter outperform the futures contracts themselves.
Source: Leverage Shares analysis
Despite 1BRN and LCOM being built on the same fuel type, the former has delivered 1.4% in excess returns relative to the latter in the YTD. In other words, there’s always potentially cash being left on the table if the market participant isn’t angling for physical delivery of the underlying but is investing in the futures contracts outright instead of the ETC for a trajectory-driven play.
For professional investors in Europe interested in buying exposure to consumer consumption via commodities, making trajectory plays or seeking diversification to their equity portfolios, these ETCs are highly-viable solutions. Given that they’re also priced reasonably, these ETCs are attractive even when seeking to scale up or scale down exposure.
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This is a marketing communication. Please refer to the Prospectus of the ETPs and to the KIID before making any final investment decisions.
This information originates from Investium Limited, which has been appointed as distributor of Leverage Shares products in Europe by Leverage Shares Management Company Limited (the “Arranger”). Investium Limited with registered address at 6 Nikou Georgiou Street, Office 302, 1095 Nicosia Cyprus, is a financial services provider regulated by the Cyprus Securities and Exchange Commission (CySEC).
The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. Investium Limited and the Arranger (together referred as “Leverage Shares”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of Leverage Shares. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Leverage Shares.
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Information contained in this website is intended only to provide general and preliminary information and does not constitute any legal or investment advice, an offer to sell or solicitation to buy any security, including shares of any Exchange Traded Products (“ETPs”).
An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
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An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
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