Record January stock-market rally left these ETFs behind. Few are set to bounce.

While mega-cap tech names once again propelled the U.S. stock market to solid monthly gains to start 2024, some of last year's laggard stocks continued to struggle.

All three major US benchmark indices ended January with positive gains on Wednesday, helped by a further advance in some of the so-called Magnificent Seven stocks, as well as expectations that the Federal Reserve would begin to ease monetary policy in the first semester of this year. Stock indexes also posted their third consecutive monthly advance, the longest streak since mid-2020, according to Dow Jones Market Data.

For the month, the S&P 500

rose 1.6%, while the Dow Jones Industrial Average

rose 1.2% and the Nasdaq Composite

rose 1%, according to FactSet data.

See: Fed meeting: Dow Jones closes down more than 300 points after Powell said March rate cut unlikely

Here's a look at some of the worst-performing exchange-traded funds in January, based on FactSet data through Wednesday, January 31.

China ETF

China's stock market had a difficult 2023 and the decline accelerated in the first month of the new year.

The CSI 300 Benchmark

fell 6.3% in January to end the month at its lowest level in five years amid concerns that a series of stimulus measures implemented by Chinese authorities in recent weeks are still not enough to revive the deterioration of economic prospects, or to boost investor confidence, weakened by the disappointing economic recovery after years of self-imposed isolation due to Covid-19.

See: Evergrande ordered liquidation: What investors should know about China's economy

To further complicate matters, earlier this week, troubled Chinese real estate developer Evergrande
Hong Kong: 3333

is facing liquidation after a Hong Kong court found the company unable to deliver on its restructuring plan, extending a long-term drag on growth for the beleaguered property development sector. Meanwhile, billions of dollars in losses on derivatives linked to the country's stock indices, or so-called snowball derivatives, also fueled the recent market avalanche.

The Invesco Golden Dragon China ETF

fell 14.2% this month to record its worst monthly performance since October 2022, when it fell 25%, while the Invesco China Technology ETF

fell 20.5% in January to suffer its worst month since 2011, according to Dow Jones Market Data.

See: Stock investors flock to China stock funds in 'world's most attractive' long trade

While some market participants have started looking for a reason to buy Chinese stocks due to their cheaper valuations, others remain unconvinced because they believe the problems in the country's economy may last for a while.

"Investors typically need to see a sustained acceleration in China's economic activity before their stocks outperform," said Alejandra Grindal, chief economist at Ned Davis Research. She expects the country's monetary and fiscal support to remain intact, but there will be "nothing daunting" as the Chinese government "has no desire to overstimulate" amid the risk of creating bubbles.

It is also possible that the stimulus will be less effective due to an unsustainable level of debt and a shrinking populationhe wrote in a research note earlier this week.

"We remain concerned about China's long-term growth trajectory as its demographic outlook deteriorates further and the economy becomes more internalized," Grindal said.

See: China's low birth rate will slow its stock market. This is when to expect it.

Electric Vehicles and Tesla-Related ETFs

Prices of some electric vehicle stocks plunged in January.

Tesla Inc. Stock
TSLA

fell 24.6% to record its worst month since December 2022, when shares fell 36.7%, according to FactSet data, after the electric vehicle maker reported quarterly earnings that Wall Street “hugely disappointed” last week.

Some of the clean energy ETFs that invest in Tesla and other electric vehicle manufacturing companies also fell this month. The First Trust Nasdaq Clean Edge Green Energy Index Fund

fell 17.7% in January to record its worst month since October, while the Global
,

which invests in companies across the lithium cycle, including mining, refining and battery production, fell 18.6% in January to record its biggest monthly drop since March 2020, according to FactSet data.

ARK Innovation ETF

The ARK Innovation ETF

fell 13.3% in January after two of the largest holdings from Cathie Wood's flagship fund: Coinbase Global
CURRENCY

and Tesla Inc. each fell about 25% this month, according to FactSet data.

MarketWatch reported earlier this month that ARKK has bought more than $20 million in Tesla stock three times in three weeks, each time on big sell-off days. That was a big change from his moves last year to cut its large stake in the electric vehicle giant.

Clean Energy ETF

Clean energy ETFs hit by its sensitivity to higher interest rates in 2023but its lackluster performance continued into the new year.

The Invesco Solar ETF

fell 20.6% in January to record its biggest monthly drop since March 2020, while the iShares Global Clean Energy ETF

fell 11.3% during the same period, according to FactSet data.

MarketWatch reported last week that another Donald Trump presidency could hurt this ETF sector as the former president is expected to roll back Biden's signature climate policies, such as the Inflation Reduction Act and his $369 billion in tax breaks and clean energy subsidies, should he win a second term.

Last year, the renewable energy sector witnessed one of the most difficult years in its short history due to supply chain issues, rising financing costs and a notable slowdown in secondary market transactions. . ICLN fell for three consecutive years between 2021 and 2023, after posting an annual return of more than 140% in 2020 following Biden's election victory, according to FactSet data.

Here's a look at the worst-performing ETFs over the past month through Tuesday, according to FactSet data.

The worst performers

%Performance

YieldMax TSLA Option Income Strategy ETF

-24.8

Invesco China Technology ETF

-19.0

Invesco Solar ETF

-19.0

Global X Lithium and Battery Technology ETF

-16.8

First Trust Nasdaq Clean Edge Green Energy Index Fund

-15.9

KraneShares CSI China Internet ETF

-13.5

Amplify ETF Junior Silver Miners

-11.6

iShares Global Clean Energy ETF

-11.0

ARK Innovation ETF

-10.5

SPDR S&P China ETF

-10.3

Source: FactSet data as of Tuesday, January 30. Start date January 2. Excludes ETNs and leveraged products. Includes ETFs traded on NYSE, Nasdaq and Cboe of $500 million or more

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