The year 2020 has been marked by the outbreak of the SARS (severe acute respiratory syndrome)-like coronavirus in late January. Due to the rapid spread of the virus, Wall Street snapped its longest bull run ever in March and went on to record its worst quarter since fourth-quarter 2008 (read: Top ETF Stories of First Quarter).
The resultant lockdowns which fell mainly in the second quarter weighed heavily on global economies. Many economies went into recession. In fact, the second quarter witnessed the historic event of negative oil price in April due to higher supplies, poor demand and a shortage of storage. Although economies started reporting upbeat economic data points with the lifting of lockdowns, fears of more waves of the contagion became rife.
Meanwhile, global central banks and governments launched a trillion-dollar stimulus in the first half. As a result, global stocks started rallying from Q2 and maintained the uptrend till August. The S&P 500, in fact, enjoyed the best August in 34 years, as investors rotated into the beaten-down segments of the year, namely the cyclicals, on vaccine hopes.
However, the rally faltered in early September on profit booking in some high-flying tech stocks (the ones which have been coronavirus beneficiaries) as well as a sudden emergence of doubts over the faster rollouts of vaccine by some pharma majors.
Overall, among the big three U.S. equity indexes, the tech-heavy Nasdaq is still a winner with 24.7% gains this year, followed by the S&P 500 (up 5.3%) and the Dow Jones (down 1.9%) (as of Sep 15, 2020). Against this backdrop, below we highlight a few sector ETFs that have beaten the broader market mightily.
Internet & Technology
Overall, the tech and healthcare sectors have emerged winners this year. ARK Next Generation Internet ETF (ARKW) (up 79%), ARK Innovation ETF (ARKK) (up 78%) and MicroSectors FANG+ ETN (FNGS - Free Report) (up 66.4%) topped the list in the technology segment. Stocks that deal with Internet-related activities have had a spectacular run as it has less to do with human contact. The rapid emergence of cutting-edge technology, including cloud computing, big data, IoT, VR, AI, has been driving the sector. The growing adoption of 5G technology — the next wireless revolution — is opening up further opportunities.
Clean energy ETFs are among the top performers this year. The cost of renewable energy generation has been downhill in recent years. The demand for solar panels is rising globally. Tesla shares’ monstrous rally has also been aiding the solar ETF. Apart from the United States, Europe and China have been focusing greatly on the clean energy area. Invesco Solar ETF (TAN) (78.6%), First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) (65.9%) and Invesco WilderHill Clean Energy ETF (PBW - Free Report) (up 64.8%) are the toppers out here.
Social distancing has led consumers to shift toward online shopping. The trend made online retail ETFs great winners. ProShares Online Retail ETF (ONLN) (up 70%), Amplify Online Retail ETF (IBUY) (up 67.6%), ProShares Long Online/Short Stores ETF (CLIX - Free Report) (up 66.6%) and Franklin Disruptive Commerce ETF (BUYZ) (up 64.3%) benefited immensely this year.
The video game industry is stealing the thunder of traditional media and entertainment thanks to the coronavirus pandemic. The pandemic continues to buoy the video games industry as people are increasingly engaging in modes of in-house entertainment. Earnings have been favorable in the industry. There have been upbeat deals activity in the space too. Global X Video Games Esports ETF (HERO - Free Report) (up 63.6%), VanEck Vectors Video Gaming And ESports ETF (ESPO) (up 58%) and Roundhill BITKRAFT Esports Digital Entertainment ETF (NERD - Free Report) (up 55.8%) are the winners here (read: Sports Betting ETF Soars on Mega-Event Fervor).
Silver has been on a stellar ride this year with prices climbing to the highest level in nearly seven years lately. Increase in investment demand, pick-up in industrial activity due to factory reopening after lockdowns, and investors’ appetite for alternatives to the safe-haven asset gold (which became pretty pricey after an early-year rally) led to the outperformance. As a result, iShares MSCI Global Silver And Metals Miners ETF (SLVP) (up 54.2%) and UBS ETRACS CMCI Silver Total Return ETN (USV - Free Report) (up 52.9%) won big time this year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>