April proved to be the solid month for the U.S. stock market with all the three major indices hovering near record highs. In fact, the S&P 500 topped the new milestone of 4,000 for the first time on the first day of April while the Nasdaq Composite Index regained momentum on the pullback in Treasury yields from the peak reached last month.
The rally came on a strong start to the Q1 earnings season and rounds of upbeat economic data, pointing to a rebound in consumer spending, sentiment and the jobs market. Notably, Q1 results from 30.6% of the S&P 500 members that have reported are up 46% on 5.9% higher revenues, with 84.3% beating EPS estimates and 75.2% beating revenue estimates. This is a notably better performance relative to the group companies seen in the other recent periods. Looking at Q1 as a whole, combining the actual results that have come up with estimates for the still-to-come companies, total earnings are expected to increase 31% on 6.8% revenue growth. This reflects a solid improvement from the 12.6% growth expected at the start of Q1 and follows the 3.1% earnings growth in Q4. Investors should note that Q1 earnings are on track to reach a new quarterly record at $381.6 billion, surpassing the previous record of $373.7 billion set in Q4 2020 (read: ETFs to Play the Strong Q1 Earnings Trend). Additionally, rapid vaccinations, progress on more vaccines and expanded stimulus continued to drive the stocks higher. Further, the United States is expected to become the engine of the global economy this year with the strongest growth in decades. Per the IMF projection, the U.S. economy is expected to grow 6.4% this year. Per the latest report from the Commerce Department, the U.S. economy expanded 6.4% annually in the first quarter, indicating a fast recovery from the recession. Against such a backdrop, we have highlighted five sector ETFs that outperformed in April and are likely to continue doing so, should the same trends prevail. Simplify Volt Cloud and Cybersecurity Disruption ETF – Up 11.5% The rapid adoption of cloud computing, big data, IoT, virtual reality, AI, machine learning, digital communication and 5G technology are raising the need for more stringent cyber security from hackers, leading to an upsurge in cyber security stocks. This thematic investment product is actively managed and is designed to concentrate on those few disruptive companies poised to dominate the new era of the cloud and then enhance the concentrated exposure with options. It holds 23 securities in its basket with the largest allocation to the top three firms that collectively make up for 70% of the total assets. The ETF is a high-cost choice, charging 1.02% in annual fees. It has accumulated $1.8 million in its assets since its inception in late December and trades in an average daily volume of 5,000 shares. Global X Copper Miners ETF ( COPX Quick Quote COPX - Free Report) – Up 11.4% Strong prospects over global economic growth along with a decline in Treasury yields have been pushing the red metal higher. The copper price is currently trading at 10-year high. COPX offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 32 stocks in its basket. Canadian firms take the largest share at 32.6% while Britain and United States round off the next two spots. The product has managed $924.6 million in its asset base while charging 65 bps in fees per year. It trades in a good volume of 625,000 shares a day on average (read: Copper at 10-Year High: Are ETFs Headed for Further Rally?). InfraCap MLP ETF ( AMZA Quick Quote AMZA - Free Report) – Up 10.3% Master Limited Partnerships (MLPs) represent an attractive investment option for income-focused investors as these pay out substantially all of their income to investors on a regular basis. These have relatively consistent and predictable cash flows, making them safer and less risky than the other plays in the broader energy space. In addition to high yields and the potential for capital appreciation, MLPs also have lower volatility and provide diversification benefits to the portfolio. The rise in oil price also bodes well for the sector. AMZA is an actively managed ETF providing exposure to midstream master limited partnerships (MLPs) with emphasis on high current income. Holding 40 stocks in its basket, the fund is unpopular and illiquid in the MLP space with AUM of $241.5 million and average daily volume of 121,000 shares. The product has higher expense ratio of 2.01%. VanEck Vectors Steel ETF ( SLX Quick Quote SLX - Free Report) - Up 9.3% Steel prices have been on the rise due to pent-up demand and are following the global metal rally. This fund provides a pure-play exposure to a small basket of 25 stocks by tracking the NYSE Arca Steel Index. It is highly concentrated on the top two firms at more than 14% share each while other securities hold no more than 7.7% share. American firms dominate the fund’s returns at 35%, followed by Brazil (22.5%) and Australia (14.6%). The ETF has amassed $187.1 million in its asset base and charges 56 bps in fees from investors. It trades in a moderate volume of 112,000 shares a day on average (read: 5 ETFs That Skyrocketed During Biden's 100 Days in Office). ETFMG Treatments Testing and Advancements ETF ( GERM Quick Quote GERM - Free Report) – Up 8.7% The optimism over vaccine rollout from more biotech companies has been providing an upside to GERM. This fund offers exposure to biotech companies directly engaged in the testing and treatments of infectious diseases by tracking the Prime Treatments, Testing and Advancements Index. It holds 77 stocks in its basket and charges 68 bps in annual fees. The ETF has amassed $60.6 million in its asset base and trades in an average daily volume of 19,000 shares. Want key ETF info delivered straight to your inbox?
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