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1-Year Tour From Market Crash to Boom: 5 Top ETFs

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It’s been a year since the U.S. stock market collapsed to a deep bear territory in the fastest decline in history triggered by the COVID-19 pandemic. The crisis brought economy to a standstill, leading to lockdowns and social distancing across the globe. In fact, it has ended the longest ever 11-year bull market.

The pandemic has changed the consumer landscape into a purely digital one, leading to an e-commerce boom. People have chosen to stay indoors in order to avoid direct contact, which in turn has boosted demand for cloud computing, gaming, e-sports and streaming services. As a result, the technology sector was the strongest performer and proved its resiliency amid the pandemic. Other sectors were hit hard (read: 5 ETF Winners of Coronavirus Pandemic).

The stock market staged a strong rebound from the lows and is currently hitting new highs with the major bourses crossing new milestones. Both the S&P 500 and the Dow Jones are up nearly 82% each from the low it hit during the pandemic. The S&P 500 is advancing to make a new milestone of 4,000 while the Dow Jones hit 32,000.

Rounds of massive stimulus measures by the government and the central banks as well as the race for coronavirus vaccines or treatment infused optimism into the economy. A slew of biotech firms reported encouraging trial results for the effectiveness of vaccines against the novel disease. And guess what, a few firms like Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) started to distribute the vaccines by the end of 2020. The start of vaccination has strengthened investors’ confidence in the economy, leading to expectations for a faster-than-expected recovery.

Additionally, continued progress on more coronavirus vaccines and faster vaccine deployment have been driving the stocks higher this year. President Joe Biden expects to have enough coronavirus vaccines for all Americans by May 1. The latest NPR analysis of archived data from the CDC's vaccination tracker revealed that distributions of vaccines skyrocketed in the last two weeks. Since early January, distribution reached between 8 million and 10 million total doses a week and around 20 million doses both in the last week of February and again the first week of March. If Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) keep up with its goal of delivering the vaccines, the distribution could reach 100 million for both. Recently, the FDA approved Johnson & Johnson’s JNJ single-dose vaccine for use in the United States.

Further, new stimulus is driving the stock market to new heights. President Joe Biden signed a massive $1.9 trillion new stimulus last week. The rounds of solid upbeat economic data indicate stronger-than-expected recovery. The United States added 379,000 jobs — the highest since October — in February while unemployment fell to 6.2%. U.S. manufacturing activity increased to a three-year high last month with acceleration in new orders. Consumer spending rose the most in seven months in January while construction spending surged to a record high, boosted by strong private and public outlays. Strong corporate earnings as well as signs of a healing labor market also bode well for economic growth (read: 10 Sector ETFs Flying Higher on a Recovering Economy).  

Investors should note that speedy fast-recovering economy has led to a spike in Treasury yields, especially over the longer term, thereby weighing on the technology sector. As such, cyclical sectors such as industrials, energy and materials have taken charge this year, as these are closely tied to economic growth.

While the winners seem broad-based, several ETFs have easily crushed the market by wide margins over the past year. Below, we have presented five top-performing ETFs from different industries that have gained in triple digits and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).

Invesco Solar ETF (TAN - Free Report) – Up 280.3%

This ETF offers pure-play global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 39 stocks in the basket. It is slightly tilted toward the top firm — Enphase Energy (ENPH - Free Report) — at 11.1% while the other firms make up for no more than 8.4% share. U.S. firms dominate the fund’s portfolio with nearly 46.4% share, followed by China (26.8%) and Spain (6.7%). The product has amassed $3.7 billion in its asset base and charges investors 69 basis points in fees per year. It has a Zacks ETF Rank #2 with a High risk outlook (read: Solar Installation Hits a Record in 2020: ETF to Tap the Boom).

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) – Up 239.2%

The fund targets the small-cap segment of the broad consumer discretionary space by tracking the S&P SmallCap 600 Capped Consumer Discretionary Index. It holds 91 securities in its basket with specialty retail taking the largest share at 35% while household durables, hotels, restaurants and leisure, textile, apparel & luxury goods, and auto components account for a double-digit exposure each. The product has attracted $93.2 million in AUM and charges 29 bps in annual fees. It has a Zacks ETF Rank #2.

SPDR S&P Retail ETF (XRT) – Up 210.9%

With AUM of $762 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 94 securities in its basket with key holdings in Internet & direct marketing retail, apparel retail, automotive retail, and specialty stores. The fund charges 35 bps in annual fees and has a Zacks ETF Rank #2 (read: 4 Sectors & Their ETFs Offering Great Value Now).

SPDR S&P Semiconductor ETF (XSD - Free Report) – Up 142.5%

This fund provides exposure to the semiconductors segment of the market and tracks the S&P Semiconductor Select Industry Index. It holds 38 stocks in its portfolio with none accounting for more than 4.5% share. XSD has AUM of $1 billion and charges 35 bps in fees per year. It has a Zacks ETF Rank #1 (read: What Lies Ahead for Semiconductor Stocks & ETFs?).

First Trust Small Cap Growth AlphaDEX Fund (FYC - Free Report) - Up 141.3%

This fund offers exposure to small-cap growth stocks and follows the Nasdaq AlphaDEX Small Cap Growth Index. It holds a well-diversified portfolio of 263 stocks, with each accounting for less than 1.1% share. The product has amassed $475 million in its asset base and charges 71 bps in annual fees. It has a Zacks ETF Rank #2.

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