5 Niche ETFs Dominating the Current Market Rally
Wall Street has been enjoying continued ascent with the S&P 500 and Dow Jones hitting a series of record highs. The rally strengthened last week on a strong start to the Q1 earnings season and rounds of upbeat economic data, pointing to a rebound in consumer spending, sentiment and the jobs market.
This is especially true as total earnings for the 44 S&P 500 companies (or 8.8% of the index’s total membership) that have reported Q1 results are up 93.3% on 7.7% higher revenues, with 81.8% beating EPS and revenue estimates. This is much higher than the 12-quarter average earnings decline of 1.1% and revenue growth of 4.7%.
Meanwhile, retail sales jumped 9.8% in March as cheap money, rapid COVID-19 vaccination and business re-openings spurred consumer spending. Industrial production — a measure of factory, mining and utility output — also rebounded in March while housing starts surged to a nearly a 15-year high in March. U.S. consumer sentiment increased to a one-year high in early April while homebuilder sentiment, as per the National Association of Home Builders, also saw an increase for this month (read: March Retail Sales Sparkles: Industry ETFs & Stocks to Win).
Further, the return of momentum into the big technology names lately following a pullback in Treasury yields have also bolstered investors’ sentiment.
While there have been winners in many corners of the space, we have highlighted five ETFs from different zones that were at the heart of the latest market rally over the past week and will likely to do so if the current trends prevail:
Copper: Global X Copper Miners ETF COPX – Up 9.6%
Strong prospects over global economic growth along with decline in Treasury yields have been pushing the red metal towards 9-year highs. COPX offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 29 stocks in its basket. Canadian firms take the largest share at 32.6% while Britain and United States round off the next two spots. The product has managed $815.6 million in its asset base while charging 65 bps in fees per year. It trades in a good volume of 631,000 shares a day on average.
Lithium: Global X Lithium & Battery Tech ETF LIT – Up 7.9%
Lithium prices have been soaring on the back of heavy demand for lithium batteries, which is used in electric vehicles. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 40 securities in its basket with Chinese firms taking the largest share at 39.4%, followed by United States (22.8%) and South Korea (12.3%). LIT charges investors 75 bps in annual fees and has amassed $3 billion in AUM. It trades in an average daily volume of 1.1 million shares (read: Tesla ETFs to Tap Robust Q1 Deliveries, Biden EV's Plan).
Biotech: ETFMG Treatments Testing and Advancements ETF GERM – Up 7.5%
The optimism over vaccine rollout from more biotech companies has been providing an upside to GERM. This fund offers exposure to biotech companies directly engaged in the testing and treatments of infectious diseases by tracking the Prime Treatments, Testing and Advancements Index. It holds 77 stocks in its basket and charges 68 bps in annual fees. The ETF has amassed $56.8 million in its asset base and trades in an average daily volume of 25,000 shares.
Rare Earth: VanEck Vectors Rare Earth/Strategic Metals ETF REMX – Up 6.9%
Rare earth metals got a boost from the expectation that the stronger economic recovery will drive the demand for these metals. REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 20 stocks in its basket. The ETF has AUM of $656 million and an average daily volume of 231,000 shares. From a country look, Chinese firms dominate the portfolio with a 42.4% share, closely followed by Australia (26.3%) and United States (15.1%). The product charges 60 bps in annual fees.
Gold: Sprott Junior Gold Miners ETF SGDJ: Up 6.4%
A softer U.S. dollar and a sharp pull back in U.S. Treasury yields are leading to spike in bullion price. Acting as leveraged plays, gold miners tend to experience more gains than the gold bullion. SGDJ follows the Solactive Junior Gold Miners Custom Factors Index, which measures the performance of junior gold producers with the strongest revenue growth and junior exploration companies with the strongest stock price momentum. It holds 37 stocks in its basket with Canadian firms making the largest share at 38.8%, followed by Australia (32%) and the United States (10.7%). The fund has amassed $129.5 million in its asset base and trades in a lower volume of around 34,000 shares a day. It charges 50 bps in annual fees from investors (read: ETFs & Stocks Shining on Gold's Best Week Since December).
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GLBL-X COPPER (COPX): ETF Research Reports
SPROTT-JR GLD M (SGDJ): ETF Research Reports
GLBL-X LITHIUM (LIT): ETF Research Reports
VANECK-RAR ERTH (REMX): ETF Research Reports
ETFMG-TR TST AD (GERM): ETF Research Reports
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