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4 Best ETF Areas of Q2

Sanghamitra Saha
·4-min read

The coronavirus 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 recovery. Since the market hit lows on Mar 23, the S&P 500 gained roughly 40% till early June, marking the best 50-day rally in history. Moreover, several global economies began to unlock from late Q2. While pent-up demand brought about some upbeat economic data points in Q2, fears of a second wave of virus contagion led the markets move sideways in the last few days of June.

Against this backdrop, below we highlight a few winning ETF areas of the second quarter.

Energy

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.

United States Gasoline Fund LP UGA (up 76.8%), First Trust Natural Gas ETF (FCG) (up 74.1%) and InfraCap MLP ETF AMZA (up 66.2%) are examples of the winning energy ETFs (read: 5 Energy ETFs Look Solid on Rank Upgrade, Oil Price Rise).

Gold & Silver Miners

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, fear of a second wave of coronavirus, higher levels of economic uncertainty booted the demand for this safe-haven metal and the related mining stocks too. Cheap oil has also favored gold mining ETFs as oil is an input to the miners.

Not only the Fed but also central banks globally have launched massive stimulus. Moreover, easing lockdowns in Q2 led to increased manufacturing activities. Since silver acts as an industrial metal too, we have seen silver mining companies surge in the second quarter.

The winning ETFs were ETFMG Prime Junior Silver Miner SILJ (up 69.6%), VanEck Vectors Junior Gold Miners ETF GDXJ (up 68.7%) and GOEX Gold Explorers ETF (GOEX) (up 67.4%) in the second quarter.

Online Retail

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 (up about 66%) and Franklin Disruptive Commerce ETF BUYZ (up 64.7%) are clear winners.

Cloud Computing

Cloud computing is seeing increasing usage globally. Even before the lockdown, companies had already started discarding their own data centers to rent computing from Amazon (AMZN), Microsoft (MSFT) and Google (GOOGL). However, this shift has become faster now, as millions of employees are working remotely. As a result, WisdomTree Cloud Computing ETF WCLD added 62.1% in Q2.

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United States Gasoline ETF (UGA): ETF Research Reports
 
InfraCap MLP ETF (AMZA): ETF Research Reports
 
Amplify Online Retail ETF (IBUY): ETF Research Reports
 
ETFMG Prime Junior Silver Miners ETF (SILJ): ETF Research Reports
 
VanEck Vectors Junior Gold Miners ETF (GDXJ): ETF Research Reports
 
Franklin Disruptive Commerce ETF (BUYZ): ETF Research Reports
 
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
 
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Zacks Investment Research
 
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