The first quarter of 2020 was marked with a few distressing Wall Street data points. The Dow Jones (down 23.2%) saw the worst quarter in history, which was also the worst for the S&P 500 (down 20%) after fourth-quarter 2008. The coronavirus outbreak in various parts of the world, lockdowns in many countries, massive economic losses and a global oil price war instigated by a row between Saudi Arabia and Russia led to the massacre.
Against this backdrop, we highlight a few industries and their related ETFs that emerged victorious in the first quarter and also topped the S&P 500. These ETFs are likely to stay strong even in the second quarter, which won’t be free of virus risks as well.
Simply put, with no signs of a slowdown in coronavirus cases globally, we have to trade in an economy inflicted by it, at least until the situation normalizes.
Here are the Q1 winners that are set to rally in Q2.
Online retailing was less hammered by the market crash. The area emerged as a safe haven amid the latest medical crisis as even people on quarantine need daily essentials. Restaurant or grocery companies with solid online presence won the show.
Amazon (AMZN - Free Report) , Instacart and Walmart (WMT - Free Report) witnessed a surge in online shopping during Q1. ProShares Long Online/Short Stores ETF (CLIX - Free Report) added 14.3% in the first quarter. We may also expect decent gains in staples stocks that have an online presence (read: Is Coronavirus a Boon for Online Retail ETFs?).
Increasing coronavirus-induced lockdowns (in several countries) and self-isolation led to an increase in video game usage and live streaming. Plus, the video-gaming industry is waiting for a “new super cycle.” There are Sony’s (SNE - Free Report) expected launch of PlayStation 5 and Microsoft’s (MSFT - Free Report) impending presentation of its “next-gen” console — Project Scarlett — in the holiday season of 2020.
VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report) and Global X Video Games & Esports ETF (HERO - Free Report) added about 2.6% and 0.5%, respectively, while ETFMG Video Game Tech ETF (GAMR - Free Report) lost just 4.7% in the quarter (read: 2 Solid Reasons to Bet on Video Gaming Stocks & ETFs Now).
The cloud has given organizations a great advantage in running businesses amid shutdowns. Zoom’s ZM videoconferencing tools were a huge hit in Q1. JPMorgan analyst Sterling Auty says “third-party data indicate that daily usage was up more than 300% from before the pandemic forced workers into their homes,” quoted on MarketWatch.
Meanwhile, Microsoft’s cloud usage has jumped about 800%. LogMeIn Inc. (LOGM - Free Report) , a maker of remote-connectivity software, saw 10 times higher usage of its videoconferencing and meeting tools from the pre-outbreak levels.
WisdomTree Cloud Computing Fund WCLD (down 6.1% YTD), Global X Cloud Computing ETF CLOU (down 7.3% YTD) and First Trust Cloud Computing ETF (SKYY - Free Report) (down 9.7% YTD) are the beneficiary ETFs.
Internet stocks and ETFs should be better protected than the broader sector as it has less to do with human contact. Plus, the outbreak has raised the need for technological advancements even more, given the rising work-and-learn-from-home trend, video streaming, downloads and the resultant Internet usage. O'Shares Global Internet Giants ETF (OGIG - Free Report) was off only 5.1% in the first quarter.
The rampant usage of Internet amid lockdowns enhanced the need for cyber security. Notably, hackers are taking advantage of the coronavirus panic. There have been “phishing efforts by sending out emails designed to look as if they’re official notices from the World Health Organization.”
To combat the threat, an international group of nearly 400 volunteers has been formed with expertise in cybersecurity at major companies like Microsoft and Amazon. The prime motto of the group would be to protect “hacks against medical facilities and other frontline responders to the pandemic.” No wonder, cyber security stocks are good bets for Q2. iShares Cybersecurity and Tech ETF IHAK has lost just 6.8% so far this year.
At the current level, researchers around the world are striving to come up with vaccines for the virus and are thus dissecting the genomes of the virus. So, one can expect the area to be in focus in the coming days and funds like Franklin Genomic Advancements ETF HELX (down 6.7% YTD), iShares Genomics Immunology and Healthcare ETF IDNA (down 10%) and VanEck Vectors Biotech ETF (BBH - Free Report) (down 8.2% YTD) to stay steady in this research phase.
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