Investors have turned attention to the Schwab US Dividend ETF (SCHD) this year as it jumped to a record high, beating the benchmark funds tracking the Nasdaq 100 and S&P 500 indices. SCHD has jumped by 27% this year and is set to overtake the Vanguard Dividend Appreciation (VIG) fund.
Breakwave Tanker Shipping ETF is the best-performing fund this year
However, another smaller fund, known as the Breakwave Tanker Shipping ETF (BWET), is doing much better. It has jumped by over 1,718% this year, making it the best-performing fund in the United States. Its assets under management (AUM) has jumped to $119 million, while its expense ratio is a whopping 3.50%.
BWET has jumped because of the ongoing crisis in the Middle East that has pushd shipping prices to the highest level in years. This fund uses freight futures contracts to track movements in the tanker shipping rates. It does not invest in tanker companies.
BWET does that by investing in freight futures contracts of one-to-six months contracts, which have a weighted average expiration of between 60 and 90 days. 90% of these contracts are in Very Large Crude Carriers (VLCC), while the rest are on the Suezmax class.
Shipping prices have jumped sharply in the past few months, which has also helped push shipping companies to their record highs. A basket of 35 US and European-listed shipping stocks have soared by about 68% this year and 82% in the last 12 months.
Shipping costs continued rising this week after the US and Iran restarted their kinetic activity. On Thursday morning, Iran announced that it had launched several missile and drones towards Kuwait, a major US ally. It did that to retaliate against the recent attacks.
The ongoing crisis has led to a plunge in traffic through the Strait of Hormuz, which accounts for about 20% of the global oil shipments. Many ships are currently trapped near the strait, with operators hiking prices.
This trend may continue in the foreseeable future, especially if the crisis between the two countries escalates.
At the same time, the Russia-Ukraine war is continuing, with both sides targeting key shipping infrastructure. The two sides are expected to continue fighting now that negotiations have failed.
BWET ETF technical analysis
The daily chart shows that the BWET ETF has soared in the past few months and is now hovering near its all-time high. It has remained above all moving averages and the Supertrend indicator.
The risk, however, is that the fund is forming a double-top pattern at $483 and a neckline at $336. A double-top is one of the most common bearish reversal patterns in technical analysis.
Therefore, there is a risk that the fund will drop unless bulls push it above the key resistance level at $483. A clear break above that level will point to more gains towards $500.