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5 Best-Performing Sector ETFs of Q1

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The Wall Street has been enjoying a stellar ride this year, touching new highs on several occasions, buoyed by optimism over speedy economic recovery from the pandemic-driven recession. This is especially true given continued progress in more vaccines, rapid vaccination rollout, reopening of the economy and a slew of stimulus measures.

Additionally, signs of a healing labor market and better-than-expected earnings added to the strength. The combination of all these factors are leading to pent-up demand, resulting in higher demand for all types of products and services in the economy. However, growing inflationary pressure, surging Treasury yields, tech sell-off, and Biden’s first major federal tax hike proposal since 1993 have been weighing on investors’ sentiment. The tax hike plan will weigh on companies’ earnings and equity allocations in the short term (read: 5 Solid Quality ETFs to Buy Now).

With just a couple of trading sessions left to end the first quarter, the Dow Jones is up about 8.4% while the S&P 500 and Nasdaq have gained 5.7% and 1.3%, respectively.

While many corners of the equity world witnessed an upside, a few sector ETFs performed incredibly, thereby comfortably crushing the broader markets. Below, we have highlighted five such funds that have been the quarter’s star performers and could also be winners next quarter if the current trends continue.

Amplify Seymour Cannabis ETF (CNBS - Free Report) – Up 59.3%

Cannabis stocks have been the biggest winner this quarter on the wave of wider legalization as well as the growing adoption of marijuana in more states. Additionally, deal activities as well as Reddit frenzy have strengthened the case for these stocks. With AUM of $150.1 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 28 securities and charges 75 bps in annual fees. It trades in an average daily volume of 326,000 shares.

Amplify Transformational Data Sharing ETF (BLOK - Free Report) – Up 50.9%

The crazy run of cryptocurrency, bitcoin, buoyed by enthusiasm that it would become a mainstream investment and payments vehicle led to a solid rally in this ETF. BLOK is actively managed, providing investors global exposure to a basket of the leading companies engaged in the development and utilization of blockchain technologies. It has AUM of $1.1 billion in its asset base and trades in an average daily volume of 1.3 million shares. The product holds a basket of 53 stocks with American firms dominating about 56.8% of the portfolio, followed by Asia Pacific (36.8%). The ETF has an expense ratio of 0.71% (read: 5 ETF Winners of Coronavirus Pandemic).

Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) – Up 47.3%

Energy has strongly rebounded this year as oil price has been benefiting the most from the swift global economic recovery, driving the demand for energy in the tight supply condition. This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holdings 31 stocks in its basket, the fund has amassed $67.2 million in its asset base while trading in an average daily volume of 115,000 shares. It charges 63 bps in annual fees and expenses. However, the fund has a Zacks ETF Rank #4 (Sell) (read: ETFs & Stocks Leading the Energy Rally This Year).

SPDR S&P Retail ETF (XRT - Free Report) – Up 35.5%

This retail ETF was propelled by a dramatic jump in GameStop (GME - Free Report) — the result of an extraordinary frenzy spurred by social media posts from prominent CEOs and Internet influencers as well as a hedge-fund-driven short squeeze. Additionally, the ramp-up of economic activities has added to the strength. With AUM of $537.9 million, this product targets the retail sector by tracking the S&P Retail Select Industry Index. It holds 102 securities in its basket with key holdings in Internet & direct marketing retail, automotive retail, apparel retail, and specialty stores. The fund charges 35 bps in annual fees and trades in an average daily volume of around 5 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) – Up 33.7%

The consumer discretionary sector has been gaining from increasing consumer confidence about the economic growth as well as rising spending. PSCD 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 34.6% 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 $99.7 million in AUM and charges 29 bps in annual fees. It has a Zacks ETF Rank #2 with a High risk outlook.

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