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Top ETF Stories of Fourth-Quarter 2021

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The year 2021 as a whole could easily be attributed to the reopening trades after an edgy 2020 thanks to the outbreak of COVID-19 and the resultant lockdown. However, the final quarter of 2021 has been volatile, with the S&P 500 gaining 10.9% (as of Dec 30, 2021), the Dow Jones advancing about 5.8%, the Nasdaq Composite adding about 8.6% and the Russell 2000 gaining about 1.1%.

The outbreak of the new COVID variant Omicron, which is reportedly highly infectious, has caused an occasional slump in the market in Q4, particularly in November and December. Nationwide COVID-19 lockdowns in Europe in late November stirred fears of further spread of infections. And true to the fear, COVID cases spread massively in other parts of the world in December.

Meanwhile, the Fed started a fast QE tapering from November to counter red-hot inflation. Corporate earnings came in upbeat. United States Oil Fund, LP (USO - Free Report) has been muted in the past three months with an upside of 5.3%.

Despite all hurdles, we have been lucky to see the Santa rally this year due toPresident Joe Biden’s encouraging announcements. Biden has mentioned that booster shots are providing strong protection against COVID-19. Biden also mentioned that the White House is buying 500 million at-home COVID-19 tests that will be available free of cost from 2022.

The Food and Drug Administration also granted approval to Pfizer Inc.'s (PFE) oral antiviral COVID-19 pill for at-risk people aged 12 and above. This makes it the first at-home treatment for coronavirus and a potentially important tool in the fight against the fast-spreading Omicron variant.

Overall, Wall Street is hovering at record highs in late December with global markets too moving along. Against this backdrop, below we highlight a few top ETF stories of the fourth quarter.

Upbeat Earnings Season

The earnings of the third quarter were upbeat. Per the Zacks Earnings Trends issued on Dec 15, 2021, for the  S&P 500 members, total earnings and revenues were up 41.5% and 17.3%, respectively, from the same period last year. For the three index members that have reported results already for the fourth quarter, total earnings are up 20.9% from the same period last year on 14.7% higher revenues, with all three beating both EPS and revenue estimates.

Fed Speeds Up Tapering

In its December meeting, the central bank revealed that it plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and $120 billion from the start of the pandemic through November.

The speedy tapering came amid inflation, solid job gains in recent months, and a declining unemployment rate. The central bank raised its inflation outlook for 2021 and 2022. It expects inflation to rise 5.3% in 2021, up from the previous forecast of 4.2%, and 2.6% in 2022, up from 2.2% issued in September. The meeting projections revealed that 12 out of 18 FOMC members expect at least three rate increases next year (read: Inflation to Stay Hot in Early 2022: ETF Strategies to Win).

Launch of Bitcoin Futures ETFs

October 2021 will be long-remembered for the launch of first bitcoin futures ETF. The first-ever bitcoin ETF — ProShares Bitcoin Strategy ETF (BITO - Free Report) — went live on Oct 19 and has attracted more than billion dollars of capital in just two days. This made BITO the fastest ETF to reach the $1 billion milestone in history. Currently, the ETF has AUM of $1.31 billion.

The second ETF in the space — Valkyrie Bitcoin Strategy ETF (BTF - Free Report) — launched on Oct 22 has accumulated $56.0 million in its asset base. The third product in the space – VanEck Bitcoin Strategy ETF (XBTF) – has hauled in about $17.0 million.

Tesla's Touch to One-Trillion Mark; EV Space Hot With IPOs

Tesla Motors (TSLA - Free Report) joined an exclusive club of mega-cap technology companies, which includes Apple (AAPL - Free Report) , Amazon.com (AMZN - Free Report) , Microsoft (MSFT) and Alphabet (GOOGL), after crossing the trillion-dollar mark in market capitalization for the first time in late October. The rally came after the news of the biggest-ever order from Hertz.

Rivian Automotive, the electric-vehicle company backed by Amazon.com Inc.  (which has 20% stake in the automaker) and Ford Motor, went public on Nov 10, 2021, through a high-profile IPO. As shares of RIVN saw an awesome spike on market debut.

COP-26 & Gains in Alternative Energy

With COP-26 taking place in late-October and delegates from about 200 countries to be announcing how they will cut emissions by 2030, alternative energy had every reason to rally. Hydrogen is often touted as the fuel of the future as the world transitions away from fossil fuels. Though Global X Hydrogen ETF (HYDR - Free Report) and solar energy ETF Solar Invesco ETF (TAN) logged gains in October, both funds slumped later on. HYDR and TAN have declined 8.7% and 2.8%, respectively, in the past three months.

Agricultural ETFs Ripe With Profits

After a decade of underperformance, commodities are experiencing a huge rally this year thanks to optimism over global economic growth, reflation trade, widespread vaccination, chances of approval of more COVID-19 antiviral pills and supply chain disruptions. If this is not enough, several agricultural commodities specifically surged on weather concerns.

iPatha.B Coffee Subindex TR ETN (JO - Free Report) (up 16.3%), iPatha.B Softs Subindex TR ETN (JJS - Free Report) (up 6.1%) and Teucrium Wheat (WEAT) (up 5.6%) are the gainers in the field.

Technology, Semiconductor & Electric Vehicle – Best Sector

Although tech stocks took a beating in the quarter on rising rate worries, some specific areas of this sector still held their heads high. Simplify Volt Robocar Disruption and Tech ETF (VCAR - Free Report) (up 34.6%), North American Tech-Multimedia Networking ETF (IGN - Free Report) (up 22.3%) and semiconductor ETFs like S&P Semiconductor SPDR (XSD) (up 22.8%) deserve a loud applause in this category.

Semiconductor stocks are benefiting from the global shortage of chips worldwide. The pandemic has bolstered demand for chips, leading to the worst global shortage in many years (read: 4 Top-Performing Sector ETFs of Q4).