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 23.2% gains this year, followed by the S&P 500 (up 5.3%) and the Dow Jones (down 1.9%). Below we highlight the ETF areas that have outperformed the market this year and gained at least 50%.
A few Volatility ETFs have gained this year with ProShares VIX Mid-Term Futures ETF (VIXM - Free Report) (up 84.4%) and iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ - Free Report) (up 84%) deserving special mention. As the year has been pretty rocky with fast ups and downs being recorded, volatility-related products have every chance to advance.
ARK Genomic Revolution ETF (ARKG) (up 80%) is a key beneficiary of coronavirus vaccine developments. Companies within ARKG benefit from enhancing the quality of human and other life by incorporating technological and scientific developments, and advancements in genomics into their business. Development in the areas of antibody treatment and vaccines has been encouraging. So, the combination of technology, healthcare and genomics made this fund a winner amid the COVID-19 outbreak.
Overall, the tech and healthcare sectors have emerged winners this year. ARK Next Generation Internet ETF (ARKW - Free Report) (up 79%) and ARK Innovation ETF (ARKK - Free Report) (up 78%) topped the list in the technology segment. Stocks that deal with Internet-related activities have had a spectacular run as these have 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 on a downhill journey 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 - Free Report) has gained 78.6% this year (read: August Clocks Monster Gains: 5 ETF Areas Up At Least 20%).
No wonder, social distancing has led consumers to shift toward online shopping. The trend has made online retail ETFs great winners. ProShares Online Retail ETF (ONLN - Free Report) (up 70%), Amplify Online Retail ETF (IBUY) (up 67.6%) and ProShares Long Online/Short Stores ETF (CLIX) (up 66.6%) have benefited immensely this year.
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