The year 2016 sprung quite a few big surprises. This is especially true as U.S. stocks saw an uneven ride from a trough in mid-February to a peak in late December. As a result, the U.S. bourses logged in the strongest annual gains with the Dow Jones rising 13.4%, its best annual gain since 2013.

The trend is likely to continue this year as well given that the U.S. economy is clearly on a solid footing buoyed by an impressive labor market, rising wages, slowly rising inflation and increasing consumer spending. Americans have an optimistic view about the economy with confidence hitting the highest level since 2001. Additionally, the combination of other factors like return to the earnings growth era, the jump in oil price, Trump’s pro-growth policies and the rise in interest rates added to the strength.

Nevertheless, the Fed next rate hike, geopolitical tensions, volatility in oil price and a strong dollar might weigh on the stock performance this year (read: 6 Biggest ETF Stories of 2016 Worth Watching in 2017).

Given this, we have highlighted a pack of ETFs that look to outperform in 2017 given the current trends and shift in government.

SPDR S&P Regional Banking ETF (KRE Quick QuoteKRE - Free Report) : The banking sector will enjoy the dual tailwind of Trump’s policies and the rising rates. Trump seeks to deregulate the industry and dismantle the Dodd-Frank Act, which was enacted in the aftermath of the financial crisis and crimped some of the business lines of banks while the central bank has signaled for a faster pace of rate increase this year. A rising interest rate scenario would be highly profitable for banks because they would be able to earn more on lending and pay less on deposits. This would expand net margins and bolster banks’ profits. KRE is one of largest and the most popular ETFs in the banking space with AUM of over $3.5 billion and a Zacks ETF Rank of 1 or ‘Strong Buy’ with a High risk outlook (read: Bank ETF Hits New 52-Week High).

SPDR S&P Metals & Mining ETF (XME Quick QuoteXME - Free Report) : The mining sector will continue to get a bump from rebounding commodity prices, positive developments in China, a pick-up in global manufacturing activities and improving global trends. Additionally, Trump’s pro-growth policies to revive U.S. manufacturing and rehabilitate the country’s aging infrastructure added to its strength. The President-elect has proposed to spend a trillion dollars on infrastructure by rebuilding highways, bridges, hospitals and other infrastructure projects over 10 years. XME, with AUM of $855.1 million, offers a broad exposure to the U.S. metal and mining industry.

First Trust RBA American Industrial Renaissance ETF (AIRR Quick QuoteAIRR - Free Report) : As Trump plans to bring back production to the U.S., the industrial ETF will likely get a boost this year. In addition, a strong dollar should help small and mid-cap companies (which tend to do more business domestically) more than most. The ETF offers exposure to the small and mid cap securities in the industrial and community banking sectors. It has AUM of $143.7 million and has a Zacks ETF Rank of 2 or ‘Buy’ with a High risk outlook (read: Ten Predictions for the ETF Industry in 2017).

VanEck Vectors Coal ETF : China and Trump will act as a tailwind for the coal industry in 2017. This is especially true given China’s policy of restricting coal output that will lead to tight supply and Trump’s promise of reviving the downtrodden coal industry and scrap regulations. As a result, KOL with AUM of $101.4 million and a Zacks ETF Rank of 3 or ‘Hold’ rating with a high risk outlook has room for upside.

Energy Select Sector SPDR (XLE Quick QuoteXLE - Free Report) : The energy sector is poised for a surge given that robust trading in oil will likely continue in 2017. This is especially true as the historic OPEC output cut deal could end the two-year crude-oil rout and stabilize the oil market. Additionally, improving demand/supply balances, falling production in the U.S., an improving domestic economy and better economic conditions in China will add to the strength. The ultra-popular XLE has AUM of $17.6 billion and a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: 4 Top Performing Energy ETFs & Stocks of 2016).

iShares US Aerospace & Defense ETF (ITA Quick QuoteITA - Free Report) : Defense ETFs are likely to benefit from Trump’s proposals for a massive increase in defense spending. He is expected to boost U.S. military spending by $500 billion to $1 trillion. ITA has AUM of $1.8 billion and a Zacks ETF Rank of 1 with a Medium risk outlook.

PowerShares Russell 2000 Pure Value Portfolio PXSV: Small caps ETFs led the way higher in 2016 and may be a better option to play this year. This is because Trump policies should benefit small caps more as these are closely tied to the U.S. economy from which these generate most of their revenues. Additionally, a rising dollar will have negligible impact on these pint-sized companies. Further, Trump’s proposed renegotiation or termination of the North American Free Trade Agreement and building of a Mexico wall would favor small-cap stocks in case it results in a trade war or a tariff increase as expected. With AUM of $80.3 million, PXSV offers pure exposure to the small cap value segment and has a Zacks ETF Rank of 2 with a Medium risk outlook (read: 5 Small Cap ETFs and Stocks to Play January & Trump Effect).

SPDR Dow Jones Industrial Average ETF (DIA Quick QuoteDIA - Free Report) : This ETF, tracking the Dow Jones Industrial Average, has been in the spotlight given a strong rotation in leadership in the large cap domestic space after the election. As Dow Jones is on its way to hit the major 20,000 milestone, the ETF will definitely get a boost. It has amassed $14.7 billion and has a Zacks ETF Rank of 2 with a Medium risk outlook.

First Trust Consumer Discretionary AlphaDEX Fund (FXD Quick QuoteFXD - Free Report) : Solid job additions, slowly rising wages and cheap fuel are allowing consumers extra money to spend on a wide range of products. Further, a strengthening U.S. economy and robust consumer confidence is making the consumer segment a great space to stay invested in. That being said, FXD looks like an intriguing pick as it follows an AlphaDEX methodology and ranks stocks in the space by various growth and value factors, eliminating the bottom ranked 25%. The fund has AUM of $585.3 million and a Zacks ETF Rank of 2 with a Medium risk outlook (read: 5 Top-Ranked Consumer Discretionary ETFs to Buy Now).

PureFunds Video Game Tech ETF GAMR: This is the first ETF targeting the global video game industry of the technology sector including game developers, console and chip manufacturers, and game retailers. It has amassed $7.5 million in its asset base since its inception in March 2016. Increased adoption of mobile and smartphone games, virtual reality, global broadband expansion, the shift to digital media, eSports, will fuel strong growth in the video game market (read: Top 5 New Niche ETFs of 2016).

Global X Internet of Things Thematic ETF SNSR: Internet of Things has been emerging rapidly and will likely see massive growth in the coming years. There are 22.9 billion connected devices including thermostats, televisions and refrigerators in 2016. The number of connected devices is expected to double by 2020 to over 50 billion. As a result, SNSR seems the hot pick of 2017. Having AUM of $7 million, the fund provides exposure to the companies that stand to benefit from the broader adoption of the Internet of Things.

PowerShares DB US Dollar Bullish Fund (UUP Quick QuoteUUP - Free Report) : Rising interest rates will pull in more capital into the country and lead to appreciation of the U.S. dollar. UUP is the prime beneficiary of a rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The fund has so far managed an asset base of $845.8 million and has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Can Dollar ETFs Stay Strong Going into 2017?).

WisdomTree Europe Hedged Equity Fund (HEDJ Quick QuoteHEDJ - Free Report) : This ETF also seems an excellent pick given that the long-awaited milestone – euro parity with the U.S. dollar – seems much real this year with the 14-year high dollar against the euro. This fund offers exposure to a wide array of European stocks while at the same time provides hedge against any fall in the euro. It has a Zacks ETF Rank of 3 with a Medium risk outlook.

VanEck Vectors Russia Small-Cap ETF RSXJ: Russian ETFs made a strong comeback last year and are expected to move up this year as well on higher Brent crude prices given that the economy is highly energy-dependent. Trump’s victory is acting as another tailwind to the economy and stocks as the bitter relationship between Russia and the U.S. is expected to ease with the President-elect’s pro-Russia view. In particular, RSXJ targeting the small cap segment of the Russian equity market would emerge as a winner. The product has amassed $88.7 million in its asset base and has a Zacks ETF Rank of 3 with a High risk outlook (read: 4 Best Single-Country ETFs of 2016).

WisdomTree Barclays U.S. Aggregate Bond Negative Duration Fund : Negative duration bond ETFs like AGND act as powerful hedges and money enhancers in a rising rate environment. It offers exposure to traditional bonds while at the same time shorts Treasury bonds using derivatives such as interest-rate swaps, interest-rate options and Treasury futures. The short position will diminish the fund’s actual long duration, resulting in a negative duration. The ETF has amassed $17.7 million in its asset base so far.

PowerShares DB Base Metals Fund DBB: The industrial metal ETF could shine in 2017 as strong Chinese demand from infrastructure and construction projects, and Donald Trump’s promise of increased infrastructure spending in the U.S. fueled the spike in metal prices. With AUM of $284.1 million, DBB has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Forget Gold, Bet on These Industrial Metal ETFs for 2017).

iShares Silver Trust (SLV Quick QuoteSLV - Free Report) : This fund tracks the price of silver bullion measured in U.S. dollars and has accumulated $5.5 billion in its asset base. The grey metal will likely see a run-up in its prices buoyed by an uptick in global manufacturing and industrial activity as well as strong growth in the U.S. Notably, silver is used in a wide range of industrial applications, demand for which is growing thanks to consistent growth in the global solar PV industry, a rebound in global computer shipments, as well as new sources of demand for sensors used in the Internet of Things and OLED lighting. Added to the bullishness are the Trump card and the inflationary pressure in the U.S. and China that have raised the metal’s appeal as a hedge against inflation. SLV has a Zacks ETF Rank of 3 with a High risk outlook.

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