Why ETF watchlists can help you become a better investor

ETFs offer a convenient and cost-effective way to gain exposure to a diversified portfolio of assets but few investors will use them as a tool to track the performance of various sub-sectors and industries.

When I first started investing – I loved to check the overnight performance of the S&P 500, Dow and Nasdaq. If they were green, I knew my portfolio was going to have a good day. But more often than not, the S&P 500 rips higher while the ASX 200 (or your portfolio) is doing absolutely nothing. This is where an ETF watchlist can help.

Our Morning Wrap features a curated list of US-listed ETFs, offering deeper insights into overnight sector performance and what to expect in the upcoming session. The watchlist has a focus on sub-sectors from resources, healthcare, industrials and tech.

Here’s what the ETF watchlist looked like on Monday, 18 March (or Friday, 15 March in the US).

The ETF watchlist implies: 

• A strong session for copper mines and Sandfire (ASX: SFR) opened the session 1.9% higher
• Uranium stocks continued to bounce and local uranium names like Paladin Energy (ASX: PDN), Boss (ASX: BOE) and Deep Yellow (ASX: DYL) rose 2-3%

In the same session, the S&P 500 finished 0.65% lower, the Nasdaq fell 0.96% and the Dow eased 0.49%.

What are these ETFs

Most of these ETFs are run by funds management companies like Global X, iShares and VanEck. Taking a closer at the commodities section, it includes ETFs such as:

• VanEck Rare Earths and Strategic Metals ETF (NYSE: REMX): Tracks the performance of companies involved in producing, refining and recycling of rare earth and other strategic metals. It’s top holdings include Pilbara Minerals (ASX: PLS), Arcadium Lithium (ASX: LTM) and Albemarle (NYSE: ALB)
• Global X Copper Miners ETF (NYSE: COPX): Tracks the performance of top global copper miners. Its top holdings include Ivanhoe Mines, Antofagasta and Lundin Mining. BHP (ASX: BHP) is the ETF’s #8 largest exposure.
• VanEck Gold Miners ETF (NYSE: GDX): Invests in top gold miners including Newmont (ASX: NEM), Barrick Gold (NYSE: GOLD) and Agnico Eagle Mines.
• Global X Uranium ETF (NYSE: URA): Invests in a broad range of companies involved in uranium mining and the production of nuclear components. Its top holdings include Cameco, Sprott Physical and Nexgen Energy (NASDAQ: NXE).

You can find the full name, ticker and links to the respective ETF sites here (also includes text for TradingView users to copy and paste into watchlists).

Why is the ETF watchlist useful?

The best way to explain this is via a couple of examples.

Example #1 – Gold’s nine-day win streak: Gold recently rallied for nine consecutive sessions, up around 7.5% to US$2,180 an ounce. This marks the largest win streak in almost four years, dating back to July 2020. While the underlying commodity rallied almost vertically – The upside for gold stocks occurred in a much choppier fashion.

The price action for the VanEck Gold Miners ETF was rather helpful in understanding how local gold stocks would trade. For example, gold made its first meaningful push above US$2,000 an ounce on Thursday, 29 February. Interestingly, the ETF finished the session 2.2% higher, down from session highs of 3.5%. Local gold names followed the fading price action, with Northern Star (ASX: NST) and Evolution (ASX: EVN) up 0.3% and 0.7% respectively, from session highs of 2.1% and 1.7%.

Example #2 – Copper’s breakout: Copper prices crossed US$4.0/lb on Wednesday, 13 March after major Chinese copper smelters jointly agreed to cut production to cope with a shortage of the raw material. Copper has not traded above these levels since April 2023. The rally drew a strong response for the Global X Copper Miners ETF, which finished the session near session highs, up 6.0%. Local names like Sandfire Resources (ASX: SFR), Aeris Resources (ASX: AIS) and 29Metals (ASX: 29M) opened higher and rallied intraday to finish near best levels.

Although resource stocks typically mirror the performance of the underlying commodity, there are always exceptions. Monitoring the overnight performance of such ETFs can provide insights into how overseas peers performed and what to expect for the upcoming session.

Example #3 – Here are a few more miscellaneous instances where the ETF list can be useful.

• When the ETF hits a 52-week high: When a thematic ETF hits a 52-week high, it's a big deal compared to a single stock rallying to a yearly high. It implies considerable strength for the underlying sector
• It makes me think: Perhaps the Fintech ETF experiences a big rally overnight, which gets me thinking – Could this be attributed to Nasdaq trends? Maybe a heavyweight like Mastercard or Visa announced something? Did it affect a US-listed BNPL name like Affirm? Will it affect local names like Tyro Payments or Zip?
• A snapshot: Ultimately, the watchlist condenses various sub-sector performances into a one-pager that gives you a clear picture of what's happening. You can always sub in more ETFs of interest (or even US sectors). 

What about an ASX-listed version?

I make it a habit to review the US-listed ETFs every morning to gauge how local sectors are going to open. However, an ASX-listed watchlist is also reliable during market hours and post-market. While it may not offer as comprehensive coverage as the US-listed ones, here are a few names to populate your watchlist.

As always, please do your own research and consult some professional advice before making any investment decision.

Commodities:

• Bloomberg Commodity ETF (ASX: BCOM) 
• VanEck Gold Miners (ASX: GDX) 
• Betashares Global Uranium ETF (ASX: URNM)
• Global X Battery Tech & Lithium ETF (ASX: ACDC)
• Global X Hydrogen ETF (ASX: HGEN) 
• Global X Copper Miners ETF (ASX: WIRE)
• Betashares Energy Transition Metals ETF (ASX: XMET)

Crypto:

• Crypto Innovators ETF (ASX: CRYP)

Tech & Discretionary

• Betashares Cloud Computing ETF (ASX: CLDD)
• Betashares ASX Australian Technology ETF (ASX: ATEC)
• Betashares Video Games & eSports ETF (ASX: GAME)
• Betashares Global Cybersecurity ETF (ASX: HACK)
• Global X Semiconductor ETF (ASX: SEMI)
• Betashares Solar ETF (ASX: TANN)
• Betashares Online Retail and eCommerce ETF (ASX: IBUY)

Healthcare

• Global X Biotech ETF (ASX: CURE)
• VanEck Global Healthcare Leaders ETF (ASX: HLTH)