The week of December 23 to December 27 brought an eventful close to the holiday trading season, marked by heightened market volatility and shifting sector performances. Major indices, including the SPY, QQQ, DIA, and IWM, saw declines as market sentiment turned risk-averse. The SPY fell by 2.16% to 604.21, the QQQ dropped 2.24% to 530.53, the IWM suffered a significant 4.78% decline to 233.07, and the DIA slipped 2.46% to 439.37. Meanwhile, volatility indices like the VIX and VXN saw substantial spikes, with the VIX increasing by 32.95% to 13.81 and the VXN surging 29.38% to 16.61, underscoring heightened uncertainty.
Cryptocurrencies also faced a tough week, with Bitcoin (BTC) down 3.53%, Ethereum (ETH) losing 4.39%, and XRP plummeting 6.16%. In contrast, select ETFs in energy, technology, and international markets showcased resilience, such as the VanEck Oil Services ETF (OIH) climbing 2.44% and the Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) gaining 1.59%.
Global Overview
Global markets reflected a mixed sentiment. While energy ETFs like the XLE (+1.69%) gained due to stabilized oil prices, Latin American ETFs, including the iShares MSCI Brazil ETF (EWZ), dropped by 2.34%, highlighting regional economic uncertainties. In Asia, ETFs such as the Vanguard FTSE Pacific ETF (VPL) rose by 1.42%, showcasing investor optimism in the Pacific region, potentially fueled by improving trade relations and resilient growth forecasts.
Sector Overview
Energy
Energy markets led the gains, with OIH up 2.44% and XLE advancing 1.69%. The surge reflected recovering crude oil prices and increased investor confidence in the energy sector, driven by a stable demand outlook and limited supply disruptions.
Technology
Technology ETFs showed strong performance, with the iShares Semiconductor ETF (SOXX) rising by 2.40%. This gain was attributed to robust semiconductor demand across industries and positive earnings projections for key players in the sector.
Consumer Discretionary and Real Estate
Underperformers included the ProShares Online Retail ETF (ONLN), which fell by 1.55%, and the Invesco KBW Premium Yield Equity REIT ETF (KBWY), which dropped 1.10%. These declines were linked to weaker consumer spending data and rising concerns about the impact of interest rate hikes on real estate investments.
International Overview
Australia and Asia
Australian ETFs outperformed, with the Franklin FTSE Australia ETF (FLAU) gaining 2.22% and the iShares MSCI Australia ETF (EWA) advancing 1.22%. Asia ETFs like VPL showed positive momentum, reflecting optimism in the region’s economic recovery and robust export demand.
Latin America
Latin American ETFs suffered significant losses. The First Trust Brazil AlphaDEX® ETF (FBZ) dropped 3.94%, driven by political uncertainties and weaker commodity prices impacting regional economies.
Summary
The final trading week of the year revealed divergent trends across global markets, sectors, and asset classes. While volatility surged and major U.S. indices declined, energy and select international markets showed resilience. The underperformance in cryptocurrencies and certain sectors like real estate underscored challenges from macroeconomic pressures.