Over the past two months, U.S. equity markets have been quite resilient, as the major equity indexes have rallied up off their March lows. Take the S&P 500, for example, it’s up nearly 38.89% off its low while the Nasdaq-100 Index is up 41.11% from its low and is within 1.89% from its 52- week high (as of May 29, 2020). While both indexes have rallied off their recent lows, the Nasdaq100’s performance relative to the S&P 500 is quite impressive, as the Nasdaq-100 is outperforming by 15.2% on a year-to-date basis, 9.4% versus -5.8%, respectively.
When we look back at the past few months, what areas have been driving the market higher? Looking at the performance trends across the U.S. sector ETF landscape, we find that there have been two dominant “themes” that investors have favored – healthcare and thematic technology. In addition, both of these sectors are critical in how tackling the coronavirus as well as handling its impact, whether it’s developing a biotechnology company developing a COVID-19 vaccine or a cloud computing company releasing a new product that allows businesses to meet the demands of the COVID-19 economy.
Here’s a look at the sector ETF winners through May 2020:
- Cloud computing – The preeminent sector or thematic winner in 2020 is cloud computing. ETFs that provide exposure to companies that provide cloud based services and products have produced double digit returns, while core equity ETFs, such as SPDR S&P 500 ETF Trust (SPY) and the SPDR Dow Jones Industrial Average ETF Trust (DIA), are down -5.0% and -10.1%, respectively, in 2020.
- The top performing sector ETF is the WisdomTree Cloud Computing Fund (WCLD), as it’s up 38.0%, year to date. WCLD tracks the BVP Nasdaq Emerging Cloud Index (EMCLOUD), an index comprised “emerging” cloud companies (i.e. those that are growing and seeing revenue growth). In addition, at number five is the First Trust Cloud Computing ETF (SKYY) that tracks the ISE CTA Cloud Computing Index (CPQ), an index designed to include companies classified as Infrastructure-, Platform-, and Software-as-a-Service provider.
- The Invesco DWA Healthcare Momentum ETF (PTH) is the second best performing sector ETF, up 19.2% year to date, and it has rallied an impressive 15.5% over the past three months alone. PTH seeks to track the Dorsey Wright Healthcare Tech Leaders Index (DWHC), a momentum-based index that allocates to the strongest, or top performing, healthcare companies.
- Healthcare ETFs heavy in biotechnology exposure have outperformed, as well. Loncar Cancer Immunotherapy ETF (CNCR), First Trust Arca Biotechnology Index Fund (FBT), iShares Nasdaq Biotechnology ETF (IBB) and Principal Healthcare Innovators Index ETF (BTEC), all up over 10.0% or more in 2020.
- While the top sector ETFs are predominately technology or healthcare related, the First Trust Nasdaq Clean Edge Green Energy (QCLN) has managed to gain 8.3% this year, placing it in 18th place through 5/29/2020. While many of the top ETFs this year have had a strong run over the past few months, QCLN has been competitive over the past 12 months, seeing that is has gained 41.5%, while the average performance for the other ETFs in the list is nearly ten percent lower coming in at 30.51%.
- Nasdaq has a long history of designing innovative equity indexes that track the most pivotal segments of the global economy. Today, eight out of the top twenty performing sector ETFs in 2020 track Nasdaq Indexes, highlighting Nasdaq as a leading index provider in healthcare and thematic technology indexes. For more information on these indexes as well as the entire Nasdaq Index family, please visit the Nasdaq Equity Indexes website here.
Sector ETF Total Return Performance (as of May 29, 2020)
The following is a list of the top 20 US-listed sector ETFs. Inclusion criteria is based on the FactSet US equity sector ETF universe (total 271) and excludes leveraged and inverse ETFs. ETFs listed in bold track Nasdaq indexes.
Source: Nasdaq Global Indexes, FactSet.
(Sector ETF Criteria: FactSet Sector Category, Asset Class: Equity, U.S. listed, Analysis excludes leveraged and inverse ETFs)
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