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Top Sector ETFs of Summer

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The summer season, which unofficially spans from Memorial Day to Labor Day, was moderate this year for the U.S. market. This three-month long period started off with anxious investors mulling over the Brexit referendum outcome (read: Labor Day Weekend Travel Puts These ETFs in Focus).

Though the U.K. finally decided to part ways with the European Union at June end, the broader market steadied to start July after a few days of the Brexit-driven upheaval. The appeal of U.S. equities brightened and the global market took a breather from the horrendous Brexit-led sell-off in late June. Also, slight stabilization in oil prices in early July, decent corporate earnings and a volley of upbeat U.S. economic data acted as tailwinds (read: Top ETF Stories of July).

But following an outstanding July, August has been lukewarm for U.S. equities. Strengthening Fed rate hike bets and finally tepid job data at the eleventh hour left a last-minute impact on the ETF scorecard for summer. Overall, the S&P 500-based ETF SPDR S&P 500 ETF (SPY) added about 4.4% in the last three months (as of September 2, 2016) (read: ETF Winners & Losers from Earnings Season).

Below we highlight the winning sector ETFs of summer 2016.

Material

Since precious metals had an astounding rally this year, mining ETFs recorded solid gains in summer. ETFs like Global X Silver Miners ETF SIL, PowerShares Global Gold & Precious Metals ETF PSAU and VanEck Vectors Gold Miners ETF GDX added about 27.2%, 10.6% and 7.8% in the last three months (as of September 2, 2016).          

While a flight to safety boosted this safe-haven metal like gold post Brexit, silver mining ETFs gained considerably as the metal has high usage in industrial activities with about 50% of total demand coming from industrial applications. Manufacturing activities in the U.S. showed signs of improvement in the early phase of summer, ushering in gains for silver mining stocks (read: Want to Dig Into Mining ETFs with 100% YTD Gains Seen Already?).

Technology

Another soaring sector in the month was technology, a beneficiary of better-than-expected earnings and the return of risk-on sentiments. Social Media Index ETF SOCL advanced about 20.5% in the last three months while semiconductor ETFs like iShares PHLX Semiconductor SOXX and PowerShares Dynamic Semiconductors ETF (PSI) added about 14.9% and 19.6%, respectively (read: Profit from the Semiconductor Rally with These ETFs).

Health Care

Though worries are piling up in the pharma segment on the price gouging issues, every corner of the health care space is not beaten down. In fact, SPDR S&P Health Care Equipment ETF XHE held up pretty strong in summer, having returned about 15.4% against a meager 0.3% gain in SPDR S&P Pharmaceuticals ETF (XPH - Free Report) .

Notably, XHE has an exposure to healthcare equipment and healthcare supplies. Plenty of drug launches, growing demand in emerging markets and ever-increasing healthcare spending play major roles in favoring the fund. Especially, investors should note that XHE does not directly deal with segments like biotech and pharma which are shrouded in uncertainty.

REIT

The REIT sector is high-dividend paying in nature and performs well in a low rate environment. As benchmark U.S. Treasury yields hit a record low levels in summer and the economy gave assuring cues, REIT ETFs like KBW Premium Yield Equity REIT Portfolio KBWY gained traction. The fund yields as much as 5.63% (as of September 2, 2016). It advanced about 13.4% in the last three months (as of September 2, 2016).

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