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Filling ETFs in March Madness "Final Four" Brackets

The 2023 National Collegiate Athletic Association (“NCAA”) Division I Men's Basketball Tournament kicked off on Mar 14 and is expected to continue for one more week. The champion will be crowned on Apr 3 at NRG Stadium in Houston, TX. The tournament works its way up from 64 college teams to ‘Sweet Sixteen’ on Mar 22 and then to ‘Elite Eight’ on Mar 26, followed by ‘Final Four’ and, ultimately, the championship.

The basketball frenzy spills over to the stock market, with various corners of the economy such as media, advertising, restaurants, hotels and airlines turning out to be the biggest beneficiaries. The excitement surrounding the tournament and its impact on the stock world has led investors to look at ETFs that could act as a proxy for the game. Since the tournament has reached Elite Eight, let’s start filling the brackets from this level (read: 5 ETFs to Make the Most of March Madness Betting).
 
Similar to the four-region criteria of the real championship, we have chosen four factors, namely equities, bonds, commodities, currencies. Then, we have shortlisted eight ETFs that are popular in the respective segments and fit our criteria. Fortunately, most of these funds has a Zacks ETF Rank making our seeding easier. In case of a tie between ranks or no ranks, we have considered the year-to-date performance in selecting the ETF qualifying for the next round.

Equities

SPDR S&P 500 ETF Trust (SPY) vs. Invesco QQQ Trust (QQQ) — After a strong start to the year, U.S. equities got caught in feeble trading over the past few weeks, triggered first by the Fed’s aggressive rate hike expectations and then the banking crisis. QQQ wins with a Zacks ETF Rank #2 (Buy) compared with a Zacks ETF Rank #3 (Hold) for SPY.

Winner: QQQ

Bonds

iShares 20+ Year Treasury Bond ETF (TLT) vs. SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) – The treasury market is acting differently this year. While the banking crisis and the less hawkish Fed tone have compelled investors to flock to the Treasuries in recent weeks, the rounds of improving economic data are spurring confidence in the economy, raising the appeal for equities. BIL, with a Zacks ETF Rank #3, has an edge over TLT’s Zacks ETF Rank #4 (Sell) (read: Bank Scare, Uncertain Fed Raise Appeal for Cash-Like ETFs).

Winner: BIL

Commodities

SPDR Gold Shares (GLD) vs. United States Oil Fund LP (USO) – Banking fears have raised the appeal for gold while leding to a sell-off in crude oil prices. The yellow metal hit $2000 per ounce for the first time in 2023 while oil prices crashed to multi-year lows. GLD wins, gaining 9.5% so far this year against a loss of 13% for USO.

Winner: GLD

Currencies

Invesco DB US Dollar Index Bullish Fund (UUP) vs. Invesco Currencyshares Japanese Yen Trust (FXY) – Both U.S. dollar and yen are regarded as safe haven currencies. The greenback is struggling to find its footing due to worries over the global financial system, while the yen is making its way higher lately. UUP is up 0.9% so far this year, while FXY has gained just 0.3%.

Winner: UUP

Final Four (Apr 1)

We come to the four teams in this playoff tournament and the best in their specific regions. Now, we look at the one-year performance to see who has the maximum momentum heading into the next level. In the matchups, we have QQQ versus BIL on one side and GLD versus UUP on the other.

QQQ versus BIL

For this ETF faceoff, let’s take a closer look at these funds before deciding on the winner:

QQQ - Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq. Information technology accounts for 49.4% of the assets, while communication services and consumer discretionary make up for a 16.6% and 14.5% share, respectively.

Invesco QQQ is one of the largest and most-popular ETFs in the large-cap space, with AUM of $167 billion and an average daily volume of around 55.7 million shares. Invesco QQQ charges investors 20 bps in annual fees and has plunged 11.3% over the trailing one-year period.

BIL - SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 19 securities in its basket. Both average maturity and adjusted duration come in at 0.10 years (read: Most Loved/Hated ETFs Amid the Height of Banking Crisis).

SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $29.8 billion and an average daily volume of 7.9 million shares. It charges 13 bps in annual fees and has gained 2.4% over the past year.

Winner: SPDR Bloomberg 1-3 Month T-Bill ETF wins and advances toward the final round to take on the winner of the GLD versus UUP match.

GLD versus UUP

Below, we take a closer look at these funds before picking the winner:

GLD - SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $58 billion and a heavy volume of about 7 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors and has gained 9.5% in a year (read: Can Gold ETFs Continue Their Winning Run?).

UUP — Invesco DB US Dollar Index Bullish Fund is the prime beneficiary of a rising dollar as it offers exposure against a basket of six world currencies — euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities.

Invesco DB US Dollar Index Bullish Fund has so far managed an asset base of $1.2 billion while seeing an average daily volume of around 3 million shares. It charges 77 bps in total fees and expenses and has gained 6.6% over the trailing one-year period.

Winner: SPDR Gold Trust ETF wins to compete with SPDR Bloomberg 1-3 Month T-Bill ETF for the championship.

The National Championship (Apr 3)

For the championship, let’s look at the performance of both ETFs over the past five years. GLD has gained nearly 47% compared with a 6% gain for BIL. This suggests that in the ETF world, SPDR Gold Trust ETF (GLD) will likely emerge as the winner of the 2023 March Madness championship based on our ranking system and its recent performance.

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iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports

Invesco QQQ (QQQ): ETF Research Reports

SPDR Gold Shares (GLD): ETF Research Reports

SPDR S&P 500 ETF (SPY): ETF Research Reports

Invesco CurrencyShares Japanese Yen Trust (FXY): ETF Research Reports

Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports

United States Oil ETF (USO): ETF Research Reports

SPDR Bloomberg 1-3 Month T-Bill ETF (BIL): ETF Research Reports

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Zacks Investment Research