Wall Street’s 2017 rally lost steam this year on rising rate and overvaluation concerns. Increasing inflationary expectations and the accompanied surge in Treasury bond yields weighed on the stock market.
Goldman Sachs even went on to forecast a 25% fall in stocks if 10-year bond yields hit a high of 4.5%. Many market watchers expected the Fed to raise rates four times this year (one more than what has been penciled so far by the central bank), until tepid wage growth in February dampened that bet a bit lately.
Meanwhile, President Trump imposed a 25% tariff on steel imports and 10% on aluminum imports, which ignited trade war fears (read: Trump Tariffs Put These Sector ETFs & Stocks in Focus).
All these factors kept the market rally in check with SPDR S&P 500 ETF (SPY - Free Report) rising only 3.6% this year and SPDR Dow Jones Industrial Average ETF (DIA - Free Report) advancing just 1.6% (as of Mar 12, 2018).
But investors should note that not all areas have been this subdued. There are some corners which have emerged strong and have added at least 15% this year.
Cocoa prices nosedived in 2016 and 2017 owing to a supply glut in the global market, thanks to surging output in West Africa and lack of demand. But prices have increased lately with the market gearing to a four-month high.
Dry weather conditions are likely to hurt crop production in Ivory Coast, the world’s largest producer of cocoa beans. Notably, 70% of the global output hails from West African nations like Ghana and Ivory Coast. Plus, worries about diseases like cacao swollen shoot virus hurting production drove prices in recent trading. As a result, iPath Bloomberg Cocoa Subindex Total Return ETN (NIB - Free Report) has added 37.0% so far this year(read: Agricultural ETFs Stayed Strong in February).
A host of mergers and acquisitions and encouraging trends including faster drug approvals, positive clinical trials, new products and Trump’s tax reform drove the sector. Since many large biotech companies hold cash overseas, a decline in tax rate and a one-time repatriation tax are likely to boost profits for these companies. Biotech funds like Loncar Cancer Immunotherapy ETF (CNCR - Free Report) (up 30.6%) and Virtus LifeSci Biotech Clinical Trls ETF (BBC - Free Report) (up 22.15%) emerged winners (read: 4 Market-Beating Sector ETFs & Stocks of February).
Internet stocks along with the broader technology sector have been on a tear. The cyclical nature of the sector helps it alleviate rising rate worries and positions it better in a growing economy. Plus, emerging technologies like big data, Internet of Things, cloud computing, virtual reality devices, artificial intelligence and the rise of social media are benefitting these stocks materially, irrespective of the market conditions (read: 4 Sector ETFs That Crushed S&P 500 in 9-Year Bull Run).
SPDR S&P Internet ETF (XWEB - Free Report) (up 18.3%), PowerShares NASDAQ Internet ETF (PNQI - Free Report) (up 18.3%) and First Trust Dow Jones Internet ETF (FDN - Free Report) (up 18.2%) have thus been in the spotlight this year.
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