Is This the Worst-Performing Global ETF?

When assessing leaders and laggards among global exchange-traded funds (ETFs), it pays to know what constitutes "global" in the ETF landscape. It's a fund that holds both domestic and foreign assets. That means a global ETF differs from an international counterpart because the international product excludes U.S. securities.

With that housekeeping item out of the way, it's accurate to say basic beta global ETFs are performing well thanks to contributions from both U.S. and international stocks. For example, the Vanguard Total World Stock ETF (NYSEMKT: VT) is higher by 21.39% this year. That makes it easy to identify offenders among global equity ETFs.

This highly focused ETF is one of the worst in the global lot in 2025. Image source: Getty Images.

Enter the iShares Global Timber & Forestry ETF (NASDAQ: WOOD). As of Dec. 9, this ETF is lower by nearly 8% year to date. That's bad enough to make it one of the clear laggards among global ETFs. Take the leveraged and options-based ETFs off the list of the worst 2025 offenders and the timber ETF ranks even worse among this year's dismal performers.

Why timber stocks are getting chopped down

This $226.3 million ETF, which seeks to track the S&P Global Timber & Forestry Index, turned 17 years old in June so it's got a lengthy track record though it generates little fanfare. Anonymity isn't the timber ETF's enemy, but softness in the residential real estate market is a headwind.

The largest source of lumber demand is home repairs and renovations, but interest rates are still high enough that many homeowners are eschewing borrowing to pay for repairs or value-enhancing additions. That's been a drag on lumber futures, which are off about 10% from the November highs.

Speaking of interest rates, the timber ETF arguably should have delivered a better 2025 showing because the Federal Reserve lowered rates three times. As a result, rates on both 15- and 30-year fixed-rate mortgages are significantly lower today than they were a year ago. Unfortunately for lumber/timber stocks, lower mortgage rates aren't significantly boosting home sales.

Increases on that front have been incremental at best. Compounding the woes of this iShares ETF are data confirming home delistings and canceled purchase agreements are surging. That says prospective buyers and sellers can't come to terms and if the former don't get into houses, that potentially further pressures lumber demand. After all, one needs a house to refresh. If they don't have a house, they're not spending on contractors who create lumber demand.

Could the timber ETF be better in 2026?

Looking at possible catalysts for this ETF, the coming retirement and replacement of Fed Chairman Jerome Powell could lead to easier monetary policy. A series of interest rate cuts in rapid succession could serve the objective of slashing mortgage rates, potentially bringing more buyers into the residential property market while compelling current homeowners to borrow for repairs.

Looking at the forestry ETF's individual holdings, some could contribute to a 2026 rebound for the fund. Weyerhaeuser, the ETF's fifth-largest component, has the look of a value stock that's been punished too harshly. By some estimates, it trades for less than the value of the timberland it owns.

That's just one of the ETF's 26 holdings. Investors will need to display faith in other stocks residing in the fund and the Fed will need to help out in order for this ETF to be a 2026 winner.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.