4 Sector ETFs Outperforming In 2015
The broader U.S. market indices might have hit multi-year highs on several occasions this year, but are finding it hard to hold on to those gains. A mountain of woes including rate hike speculations, strength in the greenback, volatility in energy prices, seasonal slowdown in Q1 and global growth worries held back the broader market indices from shooting. To be clear, this year, the developed market caught investor attention due to a flurry of easy money. The S&P 500 has added over 1% so far this year (as of June 8, 2015) while the Dow Jones Industrial Average slipped into the negative territory. Though rate hike talks have been doing rounds for long, better than expected job data for May intensified the hearsay. Most of the market participants are now expecting to see a normalization of the Fed rate policy in September. If the guesswork comes true, we should witness a whirlwind of changes in the market. Capital flows and investing sentiments would be reversed then for reasonable reasons. As a result, many investors might now be interested to find out which U.S. sector ETFs outperformed the overall tepid broader market so far this year. There is no doubt that corporate earnings last season were subdued and the adverse impact of this was reflected on the bourses. Still, some sector ETF choices held up. Below, we have highlighted the top four sector ETFs that have outplayed the broader market: Healthcare The healthcare industry, which was one of the top performing sectors last year, is carrying out its winning momentum this year as well. Great merger and acquisition activities, promising new drugs, rising demand in emerging markets, ever-increasing healthcare spending and the Affordable Care Act helped the space to cross all barriers. As a result, iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) and iShares U.S. Healthcare Providers ETF (NYSEARCA: IHF ) have returned over 17% and 15.5%, respectively, so far this year. In the broader the healthcare space, biotech ETFs need special mention for gigantic returns that these have been offering over the last few quarters. As a matter of fact, ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) and SPDR S&P Biotech ETF (NYSEARCA: XBI ) have advanced over 39% and 30%, respectively, in the year-to-date frame (as of June 8, 2015). Technology The technology sector started the year with a bang, having posted the second-best revenue growth (7.4%) in the Q1 earnings season, per Zacks Earnings Trend. While most of the credit for the Tech sector outperformance goes to Apple (NASDAQ: AAPL ), we cannot ignore the underlying momentum. Decent IT investment across the globe will likely lend a hand to the sector. Among the toppers, SPDR S&P Semiconductor ETF (NYSEARCA: XSD ) and PowerShares DWA Technology Momentum Portfolio ETF (NYSEARCA: PTF ) deserve a special mention. While the semiconductor ETF performed strongly (up over 15%) on sector consolidation via the M&A route, PTF (up about 13%) surged on the relative strength of the underlying stocks. Housing The housing sector was crestfallen in the first quarter due to a harsh winter, but sprang back with fresh optimism in spring. Several housing related data in recent months came in at the firmer side, helping PowerShares Dynamic Building and Construction Portfolio ETF (NYSEARCA: PKB ) to return over 10% so far this year (as of June 8, 2015). Auto The U.S. automotive sector has been delivering stellar performances over the last one year. A lower interest on auto loans, cheap energy prices and an improving job market were the key drivers behind the sector’s growth. To add to this, consumers were offered plenty of discounts to improve sales. Thanks to this trend, auto ETF First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) is up 7.8% so far this year. However, we expect the hot trend to cool off a bit as the Fed raises interest rates sometime this year. Bottom Line Investors should note that this is just a recap of the sector’s ETF winners year to date. The upcoming months might see a trend reversal as many investors reshuffle their holdings to position for an imminent rate hike. Rate sensitive sector ETFs, including housing and auto, might see a pullback then. Original Post