Tech and AI ETFs aren’t the only ones surging this year. It has been a special year, and shipping ETFs like the Breakwave Dry Bulk Shipping ETF (NYSEARCA:BDRY) are up nearly 50% year-to-date due to a multitude of megatrends that are unlikely to change for the rest of the year.
The tailwinds that caused BDRY to soar so much this year are still here, and I expect the momentum to persist through at least early next year.
Before we look into the reasons behind this and what you should do with this ETF, let’s first take a look at what BDRY does.
What BDRY tracks
BDRY does not own any shipping companies. Instead, it owns freight rate futures, and these futures are only going up as shipping costs rise. You get futures exposure through this ETF without a futures account, and you do pay a fairly high premium for it.
The expense ratio is 3.5%, or $350 per $10,000 invested. It would be a dealbreaker in an environment where the shipping industry is normal. However, in an environment where the ETF can deliver high double-digit gains per year, it’s worth buying.
BDRY remains small despite the surge. Lots of investors still don’t know this niche ETF exists. It has just $30 million in assets.
Why BDRY is up
The first and foremost reason in your mind might be the Strait of Hormuz, but this is not actually the trigger that sent BDRY soaring. There is a strait west of Hormuz that many argue is even more important for the world.
That strait is called the Bab-Al-Mandeb Strait. Ships must pass through this to take the shortest possible route from Europe to Asia, and vice versa.
The issue is that Yemen lies to the east of this strait, with militants starting to disrupt shipping all the way back in 2023.
This caused shipping costs to balloon higher as ships played it safe and routed around Africa instead of going through here.
What’s more interesting is that the Red Sea is now relatively peaceful, and there have been no militant attacks here for quite some time. However, shipping companies are still too spooked to use this route and are continuing to route around Africa instead.
Of course, then the closure of the Strait of Hormuz sent shipping costs even higher.
Why shipping costs are set to stay high through this year
I believe BDRY is set for a great 2026, even as the outlook for shipping costs looks bleak. Shipping is critical, so the world will pay whatever it needs to ensure products can get around. Shipping companies are in no rush to take shortcuts and risk being struck.
Then there’s the collapse of the Iran ceasefire. President Donald Trump has said that he would be amping up strikes on Iranian civilian infrastructure soon. This is something that could spill over into region-wide tit-for-tat strikes on energy and port infrastructure. More importantly, the Houthis of Yemen may attempt to close the Bab-el-Mandeb once more if the war keeps escalating, and then we’re back to 2023 levels of disruption, but worse.
Should you buy or sell BDRY now?
Considering most people are already overweight on tech and you likely don’t have an ETF that touches directly on rising dry bulk futures, it’s worth loading up on. Most tech/AI ETFs now are just the same few dozen stocks reshuffled, so it helps to broaden your wings and capture tailwinds from elsewhere.
That said, this isn’t a fund to marry. The expense ratio alone would wreck you over a decade, and shipping rates will normalize once the war ends and new vessels hit the water. That’s not a maybe. It’s a when. But “when” isn’t this year.
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