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Be Thankful to These Outperforming Sector ETFs This Year

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The year 2019 has been all about the ebb and flow in U.S.-China trade tensions, fears of growth slowdown and global policy easing. Despite the odds, the key U.S. equity gauges rose at least 20%, scaling all-time highs on several occasions.

SPDRS&P 500 ETF (SPY - Free Report) has added about 25.5% so far this year, while Invesco QQQ Trust (QQQ - Free Report) has gained 32.1% and SPDR Dow Jones Industrial Average ETF (DIA - Free Report) has advanced 20.6%. All-world ETF iShares MSCI ACWI ETF ACWI is up 21.2%. While many corners of the market have made solid gains, some sectors emerged even stronger.

Below we highlight those winners.

Semiconductor

Occasional hopes of a U.S.-China trade deal, a 5G boom and rising consumer spending on technology have propelled the sector. Expectations of higher smartphone sales have given an added boost. IDC expects the smartphone market to record 1.6% growth in 2020, after three straight years of global contraction. Gartner too expects smartphone sales to grow again in 2020 after a decline in 2019, thanks to “broader availability of 5G models and the promotion of 5G service packages in various parts of the world by communications service providers."

SPDR S&P Semiconductor ETF XSD (up 51%), First Trust Nasdaq Semiconductor ETF FTXL (up 47.1%), VanEck Vectors Semiconductor ETF (SMH - Free Report) (up 51.9%) and iShares PHLX Semiconductor ETF (SOXX - Free Report) (48.4%) have proven to be the clear winners (read: Time to Buy the Dip in Semiconductor ETFs?).

Investors should note that not only semiconductor, the entire tech space has rallied this year. In fact, technology is on its way to record the best year since 2009. Invesco DWA Technology Momentum ETF (PTF - Free Report) (up 45.2%) and Technology Select Sector SPDR Fund (XLK - Free Report) (up 41.8%) are top-performing tech ETFs.

Clean Energy

Clean energy ETFs have ridden higher this year despite President Trump’s inclination toward booting fossil-fuel energy. Going by an International Energy Agency (IEA) report, worldwide supplies of renewable electricity are expected to expand 50% in the next five years.

A transition toward 100% clean electricity is in process in the United States. China is a major player building a green environment. Almost half of the European Union’s (EU) 28 member states have already reached or are about to touch their 2020 renewable energy targets(read: Top-Performing Alternative Energy ETFs YTD).

Invesco Solar ETF (TAN - Free Report) (up 48.2%), Invesco Exchange-Traded Fund Trust - Invesco WilderHill Clean Energy ETF (PBW - Free Report) (up 42.7%) and ALPS Clean Energy ETF ACES (up 41.1%) are some of the ETFs that have added solid gains.

Home Building

Low mortgage rates have worked wonders for housing stocks this year. With the Fed being dovish, this rate-sensitive sector has every reason to outperform. iShares U.S. Home Construction ETF (ITB - Free Report) (up 51.1%), Invesco Dynamic Building & Construction ETF (PKB - Free Report) (up 44.8%) and SPDR S&P Homebuilders ETF (XHB - Free Report) (up 41.5%) are the top-performing homebuilding ETFs (read: Here's Why Homebuilding ETFs Are Soaring).

Aerospace & Defense

Trump’s repeated pitch for a higher defense budget, rising geopolitical risks and higher commercial demand are driving defense companies. Invesco Aerospace & Defense ETF PPA (up 40.7%) and SPDR S&P Aerospace & Defense ETF XAR (up 40.8%) deserve a mention.

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