Meme-Stocks See Relief Amid Continued Macro Uncertainty

Equities extended their year-to-date losses during the recent period between selection dates (June 9, 2022 to July 14, 2022, the “Period”) of the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”). Amid continued elevated levels of inflation, the U.S. Federal Reserve (“Fed”) raised its benchmark rate by 75bps in its most aggressive hike since 1994 while signaling future increases of the same magnitude were likely to be made throughout the rest of the year. In response, investors are increasingly pricing-in the odds of a domestic recession while whispers of stagflation grow louder. Risk assets fell across the board during the Period. The S&P 500^® Index lost 8.3%, posting its worst June monthly performance since 2008. The index’s June performance capped off a 16.1% loss for Q2 2022, the worst quarter since 1970, and its worst start to a calendar year since 1962, with a decline of about 20%.

Other measures of risk remain elevated, yet below previously recorded ‘panic’ levels, indicating that the 2022 bear market in risk assets may not be posing systemic risk to the overall financial system. High Yield credit spreads, as measured by the Markit CDX North America High Yield Index, rose to their highest levels since the onset of the COVID-19 pandemic. The COBE VIX Index, a popular ‘fear gauge’ amongst some investors, also rose, and while the VIX remains at elevated levels, it may not yet be signaling a capitulation event which has typically been associated with VIX levels of 40 and above.

The BUZZ Index declined 13.7% during the month of June compared to a decline of 8.3% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index trails the S&P 500 with returns of -44.5% and -20.0%, respectively, as of the end of June.

Meme-related Equities Lead Advancing Stocks

Rising levels of inflation have notably impacted valuations of thematic and growth-related equities during 2022, as higher discount rates applied to lowered expectations for future growth have provided a significant one-two punch across the segment. Meme-related stocks have been among the hardest hit segment during the year, yet the cohort proved surprisingly resilient to the recent downward move in equities. Shares of AMC Entertainment Holdings Inc. (AMC), Chewy Inc. (CHWY), ROBLOX Corp. (RBLX) and GameStop Corp. (GME) all posted gains during the recent Period; however, despite the rally, the average trading price for those stocks remains significantly below their 52-week high, a reminder of the extent of the sell-off of the once favored segment of the market. With investor sentiment proving resilient despite the recent selloff, some wonder if the rally in meme-related stocks amidst a continued selloff across broader markets may signal a turning point and end of the current bear market.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

The top detractors to performance of the BUZZ Index featured a range of stocks primarily from the information technology, communication services and consumer discretionary sectors. Large cap technology-oriented equities were featured prominently within the top detractors to performance with chip makers Advanced Micro Devices Inc. (AMD) and NVIDIA Corp (NVDA) leading declines within the cohort.

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

Sentiment Stock Highlight – Carnival Corp.

For the past two years, the pandemic has wreaked havoc on the travel and leisure industry, as shutdowns and other restrictions have greatly reduced demand for travel. Cruise ship companies such as Carnival Corp. (CCL) were among the hardest hit as viral COVID-19 outbreaks frequently occurred across their fleets. As the world began to reopen, shares of CCL managed to recover much of their decline before concerns relating to rising inflation and soaring interest rates created an unfavorable backdrop for equities. CCL is once again trading at its March 2020 COVID-19 lows. Sentiment, however, has been trending upwards as the stock has been trending lower. With inflation at historic highs and recessionary fears on the rise, consumer spending may yet prove resilient, and spending on travel may remain strong. A potential catalyst for the cruise ship industry came this week when the CDC eliminated its COVID-19 testing requirements, which had been a major deterrent for individuals and families trying to plan trips. With this major hurdle removed, demand and bookings may increase, a dynamic which may be fueling the rise in investor sentiment towards shares of CCL. This month, CCL’s weight in the BUZZ Index rises to 2.12%, its largest weight in the Index this year.

Carnival Stock Price | January 1, 2020 – July 14, 2022

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

BUZZ Index July 2022 Rebalance Highlights

Rivian Automotive Inc.

Lucid Group Inc. (LCID) was first featured within the BUZZ Index in April 2022. The technology-focused automobile company produces the Lucid Air luxury sedan, touted as a potential competitor to Tesla’s (TSLA) flagship Model S. With the electric vehicle (“EV”) industry rapidly growing, numerous auto manufacturers have entered the segment, and several smaller start-up companies have emerged over the past few years with their own EVs. Another widely hyped EV has been the R1T electric truck from Rivian Automotive (RIVN), which was similarly regarded to LCID as being a potential competitor to market-leader Tesla. RIVN, which was formed in 2009, changed its focus to exclusively electric and autonomous vehicles in 2015, a move that helped it rapidly expand in the following years. Last September, RIVN began making deliveries of the R1T, making it the first electric pickup truck on the market. The company went public shortly thereafter, reaching a peak valuation of over $130B before succumbing to the technology and growth selloff over the past year. Shares of RIVN have subsequently declined 85%. Despite the negative stock performance, sentiment has turned positive over the past month, pushing the stock into the BUZZ Index for the first time with a 1.09% weight.

For more on rebalance results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

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Originally published by VanEck on 22 July 2022.

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