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Top ETF Stories of 1H Likely to Rule in Second-Half 2020

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The first half of 2020 was extremely volatile for Wall Street due to the coronavirus outbreak. The pandemic took the global markets in its grip in the first quarter and caused a bloodbath in various global bourses including Wall Street. However, unprecedented stimulus measures by global central banks and governments pulled the ailing global markets out very soon from the nadir in the second quarter (read: Top ETF Stories of First Quarter).

As a result, global stocks rallied in Q2 despite lockdowns and a standstill economic. The S&P 500 had its best quarter since 1998 and the best second quarter since its inception in 1957. Overall, the S&P 500 is down 1.6% this year (as of Jul 6, 2020) while the Nasdaq Composite has gained 16.3% in the year-to-date frame. The Dow Jones has suffered the most with 7.9% year-to-date loss.

Corporate cash crunch has been an acute issue in the first half. Chapter 11 business bankruptcy filings increased 26% in the first half of this year as more companies sought protection from creditors during the coronavirus pandemic, according to legal-services firm Epiq Systems Inc, quoted on Wall Street Journal.

Let’s take a look at the top ETF stories of the first half that will continue to hog attention in the second half.

Coronavirus Contagion

At the onset of 2H, the operating and investing backdrop looks mixed as the second wave of virus contagion has already hit while several economic datapoints are coming in upbeat thanks to the unlocking of economies. So, investors have to focus on reopening trade keeping the virus-led volatility in mind.

In this regard, three coronavirus-focused new ETFs should remain strong, both price and asset wise. These ETFs are Direxion Work From Home ETF WFH, ETFMG Treatments Testing and Advancements ETF (GERM - Free Report) and Pacer Biothreat Strategy ETF (VIRS - Free Report) (read: 3 New Coronavirus-Themed ETFs to Hog Attention in 2H).

Super-Dovish Fed to Keep Wall Street Charged-Up

The Fed rock-bottom interest rates, launch of unlimited QE, plans to buy highly-rated corporate bonds and speculation of yield curve control has dragged down treasury yields at extremely low levels. And cheap money flows kept Wall Street Steady even amid the pandemic. As a result, growth ETFs outpaced value ETFs in the first half and may do so in the second half too. Vanguard Mega Cap Growth ETF (MGK - Free Report) (up 16.9%) and iShares Morningstar Large-Cap Growth ETF(JKE - Free Report) (up 16.4%) have been winners in the segment (read: Growth Investing Leads in 1H: 5 Top ETFs & Stocks).

Roller Coaster Ride of Oil Price

Oil price has risen sharply after the historic collapse in April led by improving demand and supply dynamics. Reopening of economies and the resultant rise in demand, protraction of the OPEC+ output cut deal and an easing supply glut led to the jump in oil prices.

OPEC, Russia and allies agreed on Jun 6 to extend record oil production cuts until the end of July, prolonging a deal that helped crude prices double in the past two months by cutting back almost 10% of global supplies from the market.

Future course of oil price depends on the extension of OPEC output cut and the extent of demand recovery. Best-performing energy ETFs of the year so far have been VanEck Vectors Oil Refiners ETF (CRAK - Free Report) and American Energy Independence ETF (USAI).

Miners Likely to Remain Solid

Gold prices spiked to the highest level in nearly eight years on coronavirus fears. Goldman Sachs predicts a $2,000/ounce gold price within 12 months. A dovish Fed and the resultant weakness in the greenback and higher levels of economic uncertainty booted the demand for this safe-haven metal as well as the related mining stocks. Cheap oil has also favored gold mining ETFs as oil is an input to the miners.

Moreover, easing lockdowns in Q2 led to increased manufacturing activities. Since silver also acts as an industrial metal, we have seen silver mining companies surge in the second quarter. The winning ETFs so far this year have been ETFMG Prime Junior Silver Miner (SILJ - Free Report) (up 21.2%), VanEck Vectors Junior Gold Miners ETF (GDXJ - Free Report) (up 28.6%) and GOEX Gold Explorers ETF (GOEX - Free Report) (up 21.4%).

Online Retailing: A Strong Bet for 2020 & Beyond

Lockdowns have boosted online shopping activities. With the rapid digital shift to the consumer landscape due to social distancing, online shopping has surged. In early June, market research company eMarketer expected ecommerce to reach 14.5% of total retail sales in 2020, marking both an all-time high and the biggest share increase in a single year. Amplify Online Retail ETF (IBUY - Free Report) (up about 55.8%) was a clear winner in the segment.

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