Back to top

Image: Bigstock

Bet on These 5 ETF Areas for 2022

Read MoreHide Full Article

The year 2021 has remained kind to investors so far as the major market indices are ending their run in green zone. The S&P 500 and Dow Jones Industrial Averages have climbed about 27% and 10%, respectively, year to date. The Nasdaq Composite has risen 22%, while the Russell 2000 has increased nearly 14% in the year so far.

Markets remained volatile in 2021 due to the rising inflation levels, deadly variants sparking new waves of the COVID-19 outbreak and supply-chain bottlenecks stemming from the pandemic-led restrictions. However, the Federal Reserve’s continuous support helped the economy recover from the pandemic-led slowdown. Meanwhile, the Fed has started the tapering process and is expected to raise the interest rates as early as 2022. Also, concerns over the omicron variant still prevail and might affect the first few months of 2022.

However, here we highlighted a few ETF areas for investors on a hunt for parking their money in 2022 and raking in some good returns.

Retail ETFs

Consumers have been battling the rising inflation levels and COVID-19 variant concerns for a while. They seem upbeat about the accelerated coronavirus vaccine rollout and a recovering U.S. economy from the pandemic-led slumps. High levels of consumer spending and improving employment conditions kept the retail sector buzzing with opportunities. The U.S. holiday season sales figures are impressive and strong. Going by a Mastercard SpendingPulse report, holiday retail sales in the United States after excluding automotive from Nov 1 through Dec 24 climbed 8.5% year over year.

Considering the solid trends, investors may park their money in the following retail ETFs to tap the sales boom. These are SPDR S&P Retail ETF (XRT - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) , VanEck Retail ETF (RTH) and ProShares Online Retail ETF (ONLN) (read: ETFs to Win & Lose as Delta Variant Cases Surge).

Energy ETFs

Investors are closely tracking the energy sector,which is showing strength as global demand and economic growth levels are on the path of recovery from the pandemic lows. The coronavirus vaccine rollout is gradually controlling the outbreak's spread across the globe. The optimism surrounding the reopening of global economies and increasing demand are painting a rosy picture for the cyclical sectors.

According to a CNBC article, energy stocks are witnessing the best year in more than three decades. The sector has gained more than 47% for the year. Crude prices also increased nearly 60% this year as the demand outlook improves with the economic reopening.

Here are some options for investors to consider, which are Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) , Vanguard Energy ETF (VDE - Free Report) , Fidelity MSCI Energy Index ETF (FENY), The Energy Select Sector SPDR Fund (XLE) and iShares U.S. Energy ETF (IYE) (read: Energy Emerges the Best Sector of 2021: 5 ETFs Up At Least 70%).

Semiconductor ETFs

The semiconductor industry has been increasingly gaining investors' attention for a while, backed by bright prospects. The coronavirus-induced work-from-home and web-based learning trends spurred demand for chips from the PC manufacturers and data-center operators. The increasing importance of Hybrid cloud among enterprises is attracting investments from large public cloud providers, including Amazon Web Services, Microsoft Azure, Google Cloud, International Business Machines and Oracle. The data-center chip providers will likely gain from this trend.

Considering the current market prospects, investors can consider iShares Semiconductor ETF (SOXX - Free Report) , VanEck Semiconductor ETF (SMH - Free Report) , First Trust Nasdaq Semiconductor ETF (FTXL), Invesco Dynamic Semiconductors ETF (PSI) and SPDR S&P Semiconductor ETF (XSD) (read: 5 Top-Ranked ETFs That Outperformed Wall Street in 2021).

Bank ETFs

Several factors can be working in favor of the space. The Federal Reserve tapering its monthly bond purchases can boost the space. The shift toward a tighter monetary policy will push yields higher, thereby helping the financial sector. This is because the rising rates will help drive profits for banks, insurance companies, discount brokerage firms and asset managers. Steepening of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a chunk of banks’ revenues, is likely to get an impetus from the steepening of the yield curve and a modest rise in loan demand.

Here we highlight some ETFs that can gain from the bright prospects of the financial sector: Invesco KBW Bank ETF (KBWB - Free Report) , SPDR S&P Regional Banking ETF (KRE - Free Report) , iShares U.S. Regional Banks ETF (IAT) and SPDR S&P Bank ETF (KBE) (read: Inflation to Stay Hot in Early 2022: ETF Strategies to Win).

Clean Energy ETFs

The renewable energy sector is expected to remain strong in 2022. According to the International Renewable Energy Agency report, the outlook till 2022 projects global renewable power expenses to decline more, with onshore wind becoming 20-27% lower than the cheapest new coal-fired generation option.  Furthermore, factors like favorable government policies, impressive renewable investments, falling overall cost of generating renewable electricity and growing adoption of electric vehicles (EV) might keep on supporting the momentum in the space in 2022.

Against this backdrop, investors can consider the following ETFs, such as iShares Global Clean Energy ETF (ICLN - Free Report) , Invesco Solar ETF (TAN - Free Report) , First Trust NASDAQ Clean Edge Green Energy ETF (QCLN - Free Report) , ALPS Clean Energy ETF (ACES) and Invesco Global Clean Energy ETF (PBD) (read: Millennials to Inherit as Much as $68TN? ETFs to Gain).