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Top ETF Stories of April: Economically Sensitive Areas Steady

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The month of April was upbeat for Wall Street with the S&P 500 (up 4%), the Dow Jones (up 2.2%), the Nasdaq Composite (up 3.6%) and the small-cap Russell 2000 (up 0.6%) — all remaining in the green. In fact, the S&P 500 and the Dow Jones have been hovering near all-time highs. Upbeat earnings, especially the technology ones, impressive U.S. economic growth in the first quarter of 2021 and other data points like retail sales have driven the markets lately.

Let’s take look at the key happenings of the ETF world in the month.

Q1 U.S. GDP Growth Smashing

The U.S. economy grew an annualized 6.4% in the first quarter of 2021, breezing past expectations of 6.1%, following a 4.3% uptick in the previous three-month period. Apart from the reopening-driven third-quarter jump last year, the latest reading marked the best period for GDP since the third quarter of 2003.

Thanks to multiple rounds of government relief payments, households held a joint $4.1 trillion in savings in the first quarter, considerably up from $1.2 trillion before the pandemic began. This has boosted the bank ETF SPDR S&P Bank ETF (KBE - Free Report) (read: ETF Areas to Win on Smashing Q1 U.S. GDP Growth).

Shipping Continues to Gain Steam

Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) , which added about 42.3% in April, seeks to provide investors with exposure to the daily change in the price of dry bulk freight futures. The fund has been super strong in the recent months. The pickup in global economic growth has supported the dry bulk shipping rates. Gradually rising demand across all vessel categories has mainly aided the area and the related fund.

Soft Commodities Stand Strong

Agricultural commodities surged thanks to weather-related supply concerns and higher demand that encouraged investment fund buying. Corn futures jumped to their highest since 2013, wheat climbed to a seven-year high, while soybeans hit an eight-year high.

A subdued U.S. dollar, which tends to make grains more competitive on the export market, also helped the rally. Additionally, strong demand from the livestock sector boosted China’s imports of soybeans, as well as grains like corn and wheat. Teucrium Corn (CORN - Free Report) and Teucrium Wheat (WEAT) added 18.7% and 19.9%, respectively, in the month.

Industrial Metals Soar on Rising Activity & Inflation Cues

Industrial metals had a blast in the month on reopening hopes and reflationary cues. Prices of palladium, tin, lead, nickel, copper, steel soared in April. While demand has been strong, copper and nickel prices received support from the supply side. Copper prices have been on an uptrend for quite some time and are currently trading at a 10-year high level. A global push for green investments also benefited the demand for several industrial metals. iPath Series B Bloomberg Tin Subindex Total Return ETN (JJT - Free Report) (up 13.2%) and iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC - Free Report) (up 11.1%) were the key winners.

Capital Gain Tax Hike Talks Taking Center Stage; Bitcoin Dives

As has been discussed for over a year, President Joe Biden is now likely to propose a plan to raise taxes on investment gains. This would be to finance about $1 trillion in social spending that serve childcare, universal pre-kindergarten education and paid leave for workers, per sources.

The new marginal 39.6% rate would be a substantial increase from the current rate of 20%, for those earning $1 million or more. This, on top of an existing surtax on investment income, will push federal tax rates for wealthy investors to as high as 43.4%, per a Bloomberg article (read: Likely Capital Gain Tax Hike a Buying Point for These ETFs?).

Though the step is less likely to have an unfavorable long-term impact on Wall Street, some profit booking is likely in the near term. Bitcoin prices slumped on the news in April. The largest cryptocurrency dipped to below $50K in April from the $64K level. Overall, bitcoin dropped 3.8% in April (read: Are These ETFs Headed for Pain as Bitcoin Dominance Falls?).

Earnings Season Optimistic: Big Tech Overwhelms

The earnings season has been going well this reporting season with the S&P 500 expected to report 42.6% earnings growth in Q1 on 6.8% higher revenues. This was a remarkable improvement from 3.1% earnings growth in Q4 on 3% higher revenues. Tech earnings will likely see 50.3% growth on 23.4% higher revenues.

Notably, the tech-heavy Nasdaq Composite Index was a strong performer in the virus-ridden 2020 and managed to gain around 43.2%. With vaccination, economic reopening and broad-based growth taking root, some analysts are expecting moderate success for the Nasdaq this year.

However, to their surprise, big tech companies or most of the FAANGs have come up with blowout earnings in the ongoing reporting season, indicating that economic reopening is no hindrance for the space.Technology Select Sector SPDR Fund (XLK - Free Report) , Communication Services Select Sector SPDR Fund (XLC) and ProShares Online Retail ETF (ONLN) should gain from such upbeat earnings in the coming days (read: ETFs to Stack as Reopening Poses No Hindrance for Big Tech).

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