Blockchain Applications in a COVID-19 World
On-Demand webcast covering blockchain in the midst of COVID-19 (BLOK)
Stay at Home = Shop at Home
On-Demand webcast covering the changing landscape of retail amid the COVID-19 pandemic (IBUY)
Risk On or Risk Off, Consider the BlackSwan ETF (SWAN)
During a "risk-off" environment, like the current COVID-19 crisis, the BlackSwan ETF's significant exposure to U.S. Treasuries seeks to buffer against major market declines.
However, during a "risk-on" environment, like we witnessed in 2019 (and currently from the March 2020 lows), SWAN's exposure to S&P 500 LEAP options seeks to provide participation in the upside of the S&P 500 without any type of artificial performance cap.
Here is a view of how SWAN has done since inception vs. the S&P 500 Total Return Index, seeking to smooth out volatile market environments.
BlackSwan ETF (SWAN) Performance Since Inception (11/6/18 – 6/30/20)
Source: YCharts. The starting price used for this chart is the trading price on 11/6/2018, which differs from the $25.00 inception price. For Illustrative purposes only. Past performance does not guarantee future results. Investors cannot directly invest in an index.
BlackSwan ETF (SWAN) Performance YTD (12/31/19 – 6/30/20)
Source: YCharts. For Illustrative purposes only. Past performance does not guarantee future results. Investors cannot directly invest in an index.
Source: US Bancorp Fund Services. The starting price for the Since Inception cumulative return is $25.00
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund’s gross expense ratio is 0.49%. For the most recent month-end performance, please visit the Fund's website at https://amplifyetfs.com/swan.
Short-term performance may often reflect conditions that are likely not sustainable, and thus such performance may not be repeated in the future.
The Amplify BlackSwan Growth & Treasury ETF (SWAN) investment objective and strategy differs substantially from the S&P 500 Total Return Index, which is used for comparison purposes as a widely recognized measure of U.S. stock market performance. While the returns of SWAN have exhibited positive (but varying) correlation to the index over time, SWAN may invest in different securities and in different proportions than in the S&P 500 index.
The Standard & Poor's (S&P) 500 Total Return Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value, and assumes distributions are reinvested back into the index. It is not possible to invest directly in an index.
Other Key Consideratons
- Potential portfolio fit: core equity, hedged equity, alternative sleeve
- Simple solution with two low-correlated asset classes
- Seeks to pay income distributions on a quarterly basis
- Gross expense ratio: 0.49%
The Fund is not a money market fund. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. The Fund's return may not match or achieve a high degree of correlation with the return of the underlying Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. The use of derivative instruments, such as options contracts, can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. Investing in options, including LEAP Options, and other instruments with option-type elements may increase the volatility and/or transaction expenses of the Fund. An option may expire without value, resulting in a loss of the Fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund.
Amplify Macro-Trend Commentary 2Q 2020
Online Retail Commentary (IBUY)
U.S. retail e-commerce continued to thrive in the second quarter as people flocked to the digital universe for shopping and work needs amid the COVID-19 pandemic.
The Amplify Online Retail ETF (IBUY) advanced in the second quarter, with accommodative fiscal and monetary policies globally driving financial markets higher. The S&P Select Retail Total Return Index returned higher numbers for the quarter as well.
IBUY benefited from the overall increase in U.S. retail sales and, specifically, the substantial gains in U.S. e-commerce sales, which rose 92.7% in May. According to a Mastercard report, in April and May, U.S. consumers spent more than $53 billion via e-commerce.
As consumers stayed home in record numbers, several ETF holdings posted triple-digit gains in the second quarter, resulting in increased online traffic. Discount retailer Overstock.com, was the most significant performance contributor. The company benefited from increased demand for home furnishings and other key products. Furniture and home goods company Wayfair gained, while craft retailer company Etsy rose as well.
In a broadly rising market, all holdings advanced, with travel-related companies Trip.com (Hong Kong-based) and Alibaba Group Holdings (China-based) among those posting the smallest gains.
Looking ahead, shifting the winds of change may continue to fuel demand for online e-commerce. “The shift to digital ways of shopping has been undeniable, while everything else has been incredibly unpredictable,” says Steve Sadove, Mastercard senior advisor. “The question is, what changes will stick around for the long-term. Investing in your home and local shopping are two recent trends. The heightened demand for touchless services is another, which could have a tremendous impact on what stores look like and how they blend their online and brick and mortar footprints.
The S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is an equal weighted market cap index.
International Online Retail Commentary (XBUY)
International retail e-commerce thrived in the second quarter as people flocked to the digital universe for personal and work needs amid the COVID-19 pandemic.
The Amplify International Online Retail ETF (XBUY) advanced in the second quarter as accommodative fiscal and monetary policies globally boosted financial markets. XBUY also benefited from the shift in sales away from brick and mortar stores into online channels.
As consumers stayed home in record numbers in the second quarter, several holdings posted triple-digit gains in the second quarter, resulting in increased online traffic.
Australia-based retail and services firm Kogan.com, was up as the most significant contributor. The company continued to benefit from robust earnings growth. Online work platform Fiverr International Ltd was another notable contributor, increasing as the boom in remote work in the gig economy boosted its share price.
Other notable contributors were U.K.-based online fashion and cosmetics retailer Asos PLC, which gained and Canadian multinational e-commerce firm Shopify Inc., which rose as well.
Underperforming names in Q2 included China-based Yunji Inc., which declined on the back of lower first-quarter earnings and China’s Uxin Ltd. Japan-based Kitanotatsujin Corp. also detracted from performance.
Looking ahead, shifting the winds of change may continue to fuel demand for online e-commerce globally. “The shift to digital ways of shopping has been undeniable, while everything else has been incredibly unpredictable,” says Steve Sadove, Mastercard senior advisor. “The question is, what changes will stick around for the long-term. Investing in your home and local shopping are two recent trends. Heightened demand for touchless services is another, which could have a tremendous impact on what stores will look like and how they blend their online and brick and mortar footprints.”
Blockchain Commentary (BLOK)
The Amplify Transformational Data Sharing ETF (BLOK) rose in the second quarter amid a broad-based advance in risk assets. Following a challenging first quarter, BLOK increased on renewed investor interest amid stimulative fiscal and monetary policies globally, which provided support to financial markets.
Several ETF holdings performed well due to improved investor appreciation for blockchain companies benefiting from the current market environment, including digital solutions/mobile payments, internet infrastructure, and online retail.
The ETF’s top performer in Q2 was merchant services and mobile payments software company Square Inc., which rose on the back of an ongoing trend toward increased digital transactions.
Other notable contributors included internet infrastructure and advertising firm GMO Internet Inc., and online retailer Overstock.Com. Overstock benefited from a heightened demand for home furnishings and other significant products.
Some of the detractors to the portfolio were semiconductor solutions provider Canaan Inc., and exchanges operator CME Group Inc. CME Group, reported a lower average daily volume for June.
We believe the outlook for blockchain technologies remains positive as governments and the private sector seek solutions and practical applications to improve efficiency, transparency, and scalability in managing processes and global supply chains in the COVID-19 era and beyond.
Moreover, blockchain could play a key role in connecting nations, according to a Forbes report, which states that the technology is already used in Asia to track coronavirus-related financial aid and donations to businesses and individuals. For example, insurance companies are reportedly using blockchain to fast-track claims payouts, demonstrating the technology’s capabilities to track, log, and securely share sensitive financial information.
Battery Metals & EV Commentary (BATT)
The Amplify Advanced Battery Metals and Materials ETF (BATT) rose in the second quarter amid a broad-based advance in risk assets. Emerging Markets, as measured by the MSCI EM Index, increased over the same period. The Solactive Global Lithium Index rose as well.
Following a challenging first quarter, BATT rose on renewed investor interest in the second quarter amid stimulative fiscal and monetary policies globally, supporting financial markets.
The ETF, which has exposure to critical metals used in the lithium-ion battery supply chain, benefited from the continued long-term optimistic outlook for electric vehicles and expectations of a pickup in industrial demand. The global economy strives to recover from the damage wrought by the coronavirus pandemic.
Meanwhile, China EV sales fell for the 12th straight month in June. Some of the weakness was offset by steady increases in Europe, with sales of new passenger plug-ins up 23% in May over the same period last year.
The ETF’s top contributing name for the quarter was Lithium Americas Corp. The company has benefited from forecasts of strong lithium demand for the next few years. However, concerns over supply shortfalls remain, especially as the pandemic has disrupted production.
Mining companies Umicore and Bushveld Minerals Ltd. also boosted returns. The smallest contributors for the quarter were Clean Teq Holdings Ltd., Citic Dameng Holdings Ltd., and Altura Mining Ltd.
While uncertainties over the pandemic may continue to cloud the outlook for the global economy and the EV industry, there are reasons for long-term optimism. These include expectations of continued demand growth for EVs and government incentives promoting eco-friendly technology.
Cairn Energy Research Advisors, a research firm focused on the battery and EV industries, forecasts a surge in electric vehicle sales in 2021 as countries worldwide push new programs to encourage consumers to buy battery-powered vehicles. Cairn estimates global sales of EVs in 2021 will jump 36% and top 3 million vehicles for the first time.
The Solactive Global Lithium Index tracks the performance of the largest and most liquid listed companies active in exploration and/or mining of Lithium or the production of Lithium batteries.
The MSCI Emerging Markets Index stands for Morgan Stanley Capital International (MSCI), and is an index used to measure equity market performance in global emerging markets.
WHY ETF TRANSPARENCY MATTERS NOW
An important ETF characteristic during market volatility
By Christian Magoon
Whenever increased market uncertainty occurs, ETF investors should utilize a feature most ETFs offer: portfolio transparency. The majority of ETFs reveal their exact portfolio holdings on a daily basis via their official website. This real time portfolio transparency allows investors to better understand and address portfolio specific risks. While important during times of market volatility, portfolio transparency is just as valuable to any investor seeking to diversify and follow a long-term asset allocation plan.
A transparent portfolio provides the foundation on which to build both proper portfolio diversification and asset allocation. Proper diversification helps to reduce the concentration risk of an investment portfolio. When an investor seeks to diversify, it is important to know exactly what is owned inside that portfolio. Constant portfolio transparency allows for more accurate portfolio data and decisions. In another related effort to address portfolio risk, asset allocation is a method that tailors a portfolio to best fit an investor’s risk tolerance and time horizon. Predictably the more frequent the transparency of the portfolio, the more precise the asset allocation can be.
Accurately implementing and monitoring a portfolio’s asset allocation and diversification is important in all types of market environments. The portfolio transparency of ETFs provides investors with current and complete information to base crucial decisions on. Should market volatility – or risk - increase in 2018, ETF transparency will only matter more to investors as they seek to understand, position and monitor portfolios in light of marketplace risks.
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice. Diversification does not assure a profit or protect against a loss in a declining market.
Alpha is a measure of investment performance against a market index used as a benchmark.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. One cannot invest directly in an index.
Past performance does not guarantee future results.