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Top ETF Stories of 1H of 2021

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The first half of 2021 has been upbeat for stocks. While stocks were at their all-time on stimulus from Washington and vaccine distribution, rising rate worries weighed on the markets occasionally. Among major indexes, small-cap ETF (IWM - Free Report)  added 17% this year, the S&P 500 ETF (SPY - Free Report)  is up 14%, the Dow Jones ETF (DIA - Free Report)  is up 12% and the Nasdaq is up about 13%.

Against this backdrop, below we highlight a few top ETF events of the year so far.

Vaccine Distribution Boosted Stocks

On Feb 27, the United States sanctioned Johnson & Johnson's (JNJ) COVID-19 vaccine for emergency use, giving the nation a third shot at fighting the outbreak after BioNTech/Pfizer and Moderna. Hopes of proper economic reopening and a considerable rebound in global growth strengthened, resulting in a rally in leisure and transportation ETFs like U.S. Global Jets ETF (JETS) (up 14% this year) and Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report) (up 30.5% this year).

House Democrats Pass Biden’s $1.9 TN Stimulus Package

At February-end, House Democrats passed their $1.9-trillion coronavirus aid package. On Mar 6, the Senate approved President Joe Biden's $1.9-trillion stimulus package, sending the amended bill back for a vote in the House. Moreover, the White House stroke an infrastructure deal in June with a bipartisan group of senators. According to the White House, the infrastructure deal will include $579 billion in new spending.

While the coronavirus aid package boosted the entire stock market including SPY, the infrastructure deal was positive for ETFs like iShares U.S. Infrastructure ETF (IFRA - Free Report) and Invesco Dynamic Building & Construction ETF (PKB).

Dovish Fed; Policy Tightening Talks Doing Rounds

As widely expected, the Fed has held interest rates steady at a near-zero level so far this year. U.S. interest rates have been this low since March 2020. However, the forecast in the June meeting revealed that 13 members of the Federal Open Market Committee believe the Fed will hike rates in 2023 and the majority expect at least two hikes that year, per a CNBC article. Seven of the 18 members see the Fed increasing rates as early as 2022 (read: Fed Rate Hike in the Cards? ETFs to Buy).

Such talks have boosted treasury yields from 0.93% at the start of the year to 1.49% as of June 29. Naturally, value ETFs like SPYV outperformed growth ETF SPYG in some phases of 2021 as value stocks do better in a rising rate environment.

The yield curve too steepened this year and banking stocks gained. Moreover, an improving economy is always great for banking stocks as these give cues of corporations’ and households’ better financial health. This, in turn, results in lower delinquency rate. SPDR S&P Bank ETF (KBE - Free Report) added 22.6% this year.

Reddit Frenzy: GameStop, Silver and Marijuana

Reddit’s discussion popularized the world's largest video game retailer — GameStop (GME - Free Report) , silver and marijuana investing this year. Notably, Reddit’s “Wall Street Bets” forum first promoted the stock GameStop in January, which was followed by the other two

The cannabis companies also received a boost from the Democratic Party’s intentions to legalize the plant at the federal level. Shares of major cannabis stocks rallied this year on Democratic victories in Georgia’s two runoff elections. Cannabis ETF MJ and (CNBS - Free Report)  gained 44% and 48%, respectively this year (read: Marijuana ETFs on a High on Reddit Frenzy).

Energy the Winner in 1H of 2021

It seems that the coronavirus blues of the energy sector are slowly passing away. The coronavirus-led global slowdown weighed on oil demand since last year following lockdowns but growing vaccination and falling cases in the United States boosted the oil price. United States Oil Fund LP (USO - Free Report) has gained 50% this year.

The jump in oil prices came despite the rising virus cases in India. Among the various corners of the energy space, MLP companies have displayed particular strength in recent weeks (read: MLP ETFs At One-Year High: Can the Rally Sustain?). 

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