3 ETFs That Trounced the Dow During the First Half of 2014

Source: Thinkstock

Source: Thinkstock

While the Dow Jones Industrial Average rose during the first half of 2014, its performance was lackluster, with gains of just 1.7 percent. There have been several issues plaguing the market from tepid retail sales, a sharp decline in U.S. GDP during the first-quarter, and a concern that stocks in general are overvalued after rising sharply in 2013.

Furthermore, we have seen individual stocks in the Dow underperform. Financials such as JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) have taken hits on trading businesses. Wal-Mart (NYSE:WMT) was a victim of the weak retail environment in the first half. IBM (NYSE:IBM) continues to see declining sales and this has finally begun to eat into its profits.

Nevertheless, there have been some assets that have performed extremely well during the first half, and there is a good chance that this is going to continue. Furthermore, if we look at the assets that are outperforming a trend begins to emerge that suggests that the rest of 2014 could be rough.

1. The Market Vectors Junior Gold Miner ETF (NYSEARCA:GDXJ)

The GDXJ rose an incredible 30 percent during the first half of the year, although keep in mind that this was after the fund lost most of its value in 2013. Junior gold miners have performed well as the gold price has begun to recover. Furthermore, these companies have largely responded well to the weak gold price by cutting costs, and this has increased the benefit of a strong gold price. Despite tapering concerns the gold market appears to be setting up for more gains in the second half of the year as central banks such as the Bank of Russia dump Treasuries in order to buy gold. If you are looking for a high-beta way to play this trend then the GDXJ is an excellent choice, although keep in mind that this leverage operates in both directions. Investors looking for a less risky approach should consider the SPDR Gold Trust (NYSEARCA:GLD), or better yet, the Sprott Physical Gold Trust (PHYS), which has favorable tax treatment for long term holders.