4 Best ETF Sectors Of Q4

The fourth quarter of 2020 has been an eventful one through and through. There were the all-important efficacy reports of coronavirus vaccines from Pfizer, Moderna and AstraZeneca. Then Joe Biden won the U.S. presidential election and the election results brought along a divided Congress.

The quarter has also seen a tug-of-war between the Democrats and Republicans on the second round of a COVID-19 relief bill. It is just the latest December when Democratic and Republican leaders clinched a new relief deal worth around $900 billion that comprises a second round of stimulus checks and further unemployment benefits. The bill will soon be up for a vote in the House and the Senate.

Though the size of the deal this time is much smaller in scale than the earlier ones, any kind of fiscal stimulus is great. Quite expectedly, stocks soared in Q4 on vaccine and stimulus hopes. Wall Street hovered around an all-time high level. Small caps made a great comeback having suffered for the most part of the year.

S&P 500-based SPDR S&P 500 ETF Trust SPY, Dow Jones-based SPDR Dow Jones Industrial Average ETF Trust (DIA), Nasdaq-100-based Invesco QQQ Trust (QQQ) and small-cap iShares Russell 2000 ETF (IWM) gained about 11.2%, 10%, 13.7% and 32.5%, respectively, in the past three months (as of Dec 22, 2020). Against this backdrop, below we highlight the winning sector ETFs of the fourth quarter.

Clean Energy

Biden has expansionary plans for clean energy. He is forming a plan — a Clean Energy Revolution — to address the issue of climate emergency. He sees America as becoming a 100% clean energy economy by 2035 and having net zero emission by 2050.

In fact, he has a $2-trillion-plan toward combating climate change that will eliminate carbon emissions from the power grid by 2035 and accelerate the uptake of electric vehicles. If this happens, the entire supply chain of the electric vehicle industry will be charged up.

Such hopes and growing global acceptance for electric vehicles went in favor of the sector in the fourth quarter. Solar Invesco ETF (TAN(up 86.0%) and First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN) (up 71.6%) were among the clean energy ETFs that gained massively in the past three months (as of Dec 22, 2020).

Biotech/ Genomics

Ark Genomic Revolution ETF ARKG gained about 68.7% in the past three months. ARKG is made of companies that focus on areas like bioinfomatics, CRISPR and stem cell research. The areas are excessively tracked for oncology treatment. In short, genomics has been bringing about a great transformation in the healthcare industry.             

Apart from the rise in genomics, the biotech space has benefited from the dual news of vaccine rollout and a divided congress in the United States. Divided congress will protect the biopharma industry from any controversial reforms and steps taken again price gouging. No wonder, Global-X Genomics & Biotechnology ETF GNOM has also added 45.5% in the quarter.


Cannabis stocks jumped this quarter on Biden’s win. Biden’s victory could speed up the legalization of marijuana at the federal level, thereby providing a boost to the U.S. cannabis industry. Also, voters in Arizona, Montana, New Jersey and South Dakota voted in favor of the adult use of cannabis, bringing the total number of states that have cleared it for that purpose to 15.

AdvisorShares Pure US Cannabis ETF (MSOS) (up 61.9%), Amplify Seymour Cannabis ETF CNBS (up 55.5%) and Advisorshares Pure Cannabis ETF (YOLO) (up 52.0%) have been the winning ETFs in this segment.

Regional Banks

Vaccine and stimulus hopes have bolstered the risk-on sentiments in the fourth quarter. Long-term treasury yields gained in the fourth quarter considerably to reflect such string sentiments, steepening the yield curve. Since the steepening yield curve is great for regional banks, KBW Regional Banking Invesco ETF (KBWR - Free Report(up 46.5%) and SPDR S&P Regional Banking ETF (KRE(up 44.6%) won in the quarter.

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