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Top ETFs So Far This Year and Their Winning Strategies

The past is no guarantee of future performance, but sometimes it helps to look back to understand the present. While tech stocks dominate today’s list (as we’ll see below), investors may also want to examine recent bullish trends in commodities like sugar, non-tech sectors like home construction, and even countries like Mexico.

In this article, we’ll look at the top-performing ETFs this year and whether the trends supporting their success will continue.

Tech Leads

Rising interest rates may take a toll on the broader economy, but tech companies appear resilient. After last year’s deep bear market, tech stocks rapidly recovered in the first half of the year. For example, Meta Platforms Inc. (META) and NVIDIA Corp. (NVDA) doubled, and many other tech stocks have seen their shares rise by at least a third.

Top-performing tech ETFs

While artificial intelligence could become an $800+ billion opportunity, rising valuations come amid a rising interest rate backdrop. As a result, some analysts believe the tech sector’s rally could be overheating as juicy yields lure investors away from high-growth stocks. And, of course, leveraged stocks could amplify these risks.

Check out all mutual funds and ETFs focused on the technology sector here.

Crypto ETFs Dominate

Cryptocurrencies have followed tech into the black since the beginning of the year. For example, Bitcoin and Ethereum are up more than 60% and 50%, respectively. These moves have helped many crypto-focused ETFs move sharply higher since January. But despite the performance, they haven’t seen an equivalent jump in capital inflows.

Top-performing crypto-focused ETFs

Like tech stocks, the crypto sector is recovering from a sharp decline last year following the collapse of FTX. While the closures of Signature Bank and Silvergate could lead to less funding for crypto firms, the regional banking crisis has also catalyzed crypto as a banking alternative. That said, more regulation and higher rates could limit the rally.

Other Pockets of Opportunity

Tech isn’t the only sector outperforming the broader market indexes. For example, the VanEck Semiconductor ETF (SMH) and the iShares US Home Construction ETF (ITB) moved 32% and 22% higher, respectively, since the beginning of the year. Investors should monitor different sector ETFs as the economy slows down and sector rotation takes hold.

Meanwhile, sugar prices rose to 11-year highs thanks to unseasonal rainfall in India, a poor European beat crop, and summer drought conditions. As a result, the Teucrium Sugar Fund (CANE)—one of the few pure-play sugar ETFs—has surged more than 45% since January. The fund provides retail investors with exposure to sugar futures.

And finally, Mexico’s first-quarter GDP data beat expectations, sending its stock market sharply higher. The iShares MSCI Mexico ETF (EWW) rose nearly 20% since the beginning of the year, making it one of the top country ETFs. Meanwhile, the iShares MSCI Brazil ETF (EWZ) is up about 15% thanks to robust economic activity this year.

Other top-performing ETFs across non-tech sectors

The Bottom Line

The tech sector has dominated during the first half of the year as tech giants and crypto ETFs post substantial recoveries from their steep 2022 declines. That said, investors may also want to keep an eye on other megatrends including commodities like sugar and country ETFs that could offer better performance than the broader S&P 500.
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May 24, 2023