The first half of 2021 was upbeat for stocks. Among the major indexes, small-cap ETF IWM added 17% this year, the S&P 500 ETF SPY is up 14%, the Dow Jones ETF DIA is up 12% and the Nasdaq ETF Invesco QQQ Trust (QQQ) is up about 13% (read: Top ETF Stories of 1H of 2021).
The rollout of $1.9-trillion of COVID-19 stimulus package — including doling out of $1,400-stimulus checks, the announcement of the $2.3-trillion worth of infrastructure plan, joining of the Paris Climate Change agreement in support for a green economy and a massive push for coronavirus vaccination — are some of the measures that helped the stocks to win.
Meanwhile, several economic indicators came in upbeat. The Fed has held interest rates steady at a near-zero level so far this year. U.S. interest rates have been this low since March 2020. However, the forecast in the June meeting revealed that 13 members of the Federal Open Market Committee believe the Fed will hike rates in 2023 and the majority expect at least two hikes that year, per a CNBC article. Seven of the 18 members see the Fed increasing rates as early as 2022 (read: Fed Rate Hike in the Cards? ETFs to Buy).
However, rising rate worries weighed on the markets occasionally. The inflationary pressure has also been building up. The yield curve too steepened this year and banking stocks gained. Biden’s stimulus and infrastructure plan should play a pivotal role in the second half. Against this backdrop, we highlight below a few sector ETFs that are in high momentum and have gained considerably in the past four weeks.
ETFs in Focus
Transportation – SPDR S&P Transportation ETF (XTN) – Up 7.1% in past month
This is an area that was hit hard amid the lockdown. The economic reopening and the resultant improvement in supply chain as well as the slow uptick in the global tourism sector has made this relatively-beaten down area a winning one. Notably, global travel and tourism as a category is one of the largest economic sectors, making up about 10.4% of global GDP, per the ETFMG website. One out of every three millennials are ready to spend $5,000 or more on a vacation. Moreover, improvement in supply chain is also a winning proposition for the space.
Industrials – Breakwave Dry Bulk Shipping ETF (BDRY) – Up 7.1%
The pickup in global economic growth has supported the dry bulk shipping rates. Gradually rising demand across all vessel categories has mainly aided the area and the related fund. U.S. and global industrial activities have been witnessing an uptrend, which is why this shipping ETF has been benefiting.
Retail – Amplify Online Retail ETF (IBUY) – Up 7.1%
Widespread vaccination, the reopening of the economy and summer season are making Americans feel more optimistic and leading them to splurge. Additionally, a huge infrastructure spending package and expanded stimulus are acting as a catalyst for spending.
Transaction volumes on customers’ credit and debit cards and over the Zelle payment network have grown by 20% so far in 2021 compared to this point in 2019, per the Bank of America (NYSE:BAC) (which is the second-biggest U.S. bank) CEO Brian Moynihan, as quoted on CNBC. This indicates that retail stocks should be in fine fettle in the second half of the year. Online retailing is a better bet as the Covid-19 pandemic has made the stay-at-home-operation a winner (read: Here's Why Retail ETFs Are Good Picks Right Now).
Technology – Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO) – Up 21.4%
Investors should note that tech ETFs fared moderately better this year due to slightly hawkish signal from the Fed. The tech-heavy Nasdaq was the best-performer among the big U.S. equity indexes last year.
The sector outlook still remains solid given the global digital shift even in the post-COVID world with the acceleration in e-commerce for everything, ranging from remote working to entertainment and shopping. This has resulted in great returns in VCLO.
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SPDR S&P 500 ETF (SPY): ETF Research Reports
SPDR Dow Jones Industrial Average ETF (NYSE:DIA): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
SPDR S&P Transportation ETF (XTN): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO): ETF Research Reports
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