Top ETFs Of The Best Sectors This Year

Now that we are approaching the end of the first half of 2016, a look back at the road traveled so far this year sounds like a good idea. The start of the year was extremely erratic with the China meltdown and the oil price crash that stoked concerns of a global slowdown. Plus, moderation in U.S. growth in the first quarter made matters worse (read: Top and Flop Zones of Q1 and Their ETFs).

However, risk-on sentiments shored up in April thanks to a dovish Fed and an oil price rebound. The U.S. economy also started delivering upbeat readings allowing a hawkish tone in the Fed’s April minutes released in May. Soon after the minutes released, the market started to position itself for an impending near-term hike and went topsy-turvy.

Nevertheless, the life of the Fed hike talks proved too short as the release of dull U.S. job data for the month of May instantly pushed back the timeline. All these developments led the Dow Jones Industrial Average-based (V:DIA) toa 3.4% YTD gain, theNasdaq 100-based QQQ to a 1.5% YTD loss and the S&P 500-based (AX:SPY) to over 4% YTD returns (as of June 9, 2016).

Needless to say, sector ETFs gave a mixed reaction. Some led the market while some lagged. Below we highlight two sectors that outperformed and highlight their top-performing ETFs.

Material

Material ETFs have given a commendable performance so far this year (as of June 9, 2016). The strength was especially felt in the gold mining ETF space. As the Fed seems to be in no hurry to hike interest rates this year, the U.S. dollar has remained soft. In fact, the U.S. currency ETF PowerShares DB US Dollar Bullish ETF (NYSE:UUP) UUP is off 5.1% in year-to-date frame (as of June 9, 2016).

This came as a boon for commodity ETFs. Plus, the excessive volatility in the initial phase of 2016 has kept demand for safe-haven assets like gold alive. Moreover, the latest ‘Brexit’ worries keep on goading this safe-haven metal. The most recent polls are showing opinion in favor of Britain leaving the EU. If this happens, gold will know no bounds.

While several gold mining ETFs have fetched stellar returns this year, below we highlight two such products and focus on how the other material ETFs performed (read: How to Trade in Gold ETFs After Robust 30-Year Rally?).

The top-performing material ETFs are:

VanEck Vectors Junior Gold Miners ETF (NYSE:GDX) GDXJ – Up 111.3%

Global X Silver Miners ETF (CM:SIL) – Up 109%

iShares MSCI Global Gold Miners ETF RING – Up 105.7%

SPDR S&P Metals & Mining ETF (V:XME) – Up 60%

iShares MSCI Global Metals & Mining Producers ETF PICK – Up 20.2%

Energy

Apart from the Fed rate hike speculation, an oil rally has been the most talked-about topic in recent times. The liquid commodity rallied hard in recent months to touch the $50/bbl mark in May, mainly on easing supply glut (read: Inside Surging MLP ETFs).

The curb in supplies mainly emanated from production disruption in Canada due to the Alberta wildfires, militant attacks and the threat of a nationwide strike in Nigeria, the political rout in Venezuela, and reduced shale production in the U.S.

In fact, coal has also staged a price recovery lately due to supply shortage (due to inclement weather in production areas of Australia, Indonesia and Colombia)and better demand. As expected, the energy space is on a tear in the year-to-date frame (as of June 9, 2016) (read: ETFs to Gain or Lose if Trump Wins Presidential Election).

The top-performing energy ETFs are:

VanEck Vectors Coal ETF KOL– Up 40.2%

SPDR S&P North American Natural Resources ETF NANR – Up 36.6%

VanEck Vectors Unconventional Oil & Gas ETF FRAK – Up 29.6%

SPDR S&P Oil & Gas Exploration & Production ETF (V:XOP) – Up 22.3%

Guggenheim S&P 500 Equal Weight Energy ETF (V:RYE) – Up 21.9%