Image: Bigstock

The year 2021 has been a grand success for the U.S. stock market though bouts of volatility and uncertainty continue to threaten the bulls. This is especially true as the major indices have reached a series of record highs on the back of an improving economy and return of strong corporate earnings growth.

While there have been winners in many corners of the space, we highlight five ETFs from different industries that have easily crushed the market by wide margins this year and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These are First Trust ISE-Revere Natural Gas Index Fund (FCG - Free Report), SPDR S&P Homebuilders ETF (XHB - Free Report), Invesco Dynamic Semiconductors ETF (PSI - Free Report), iShares North American Tech-Multimedia Networking ETF (IGN - Free Report) and SPDR S&P Retail ETF (XRT - Free Report). These funds are likely to continue outperforming should the trends prevail.

A massive vaccination drive, an expanded stimulus and huge infrastructure spending have helped the economy to recover from the pandemic lows. This has resulted in reopening of economies and businesses, a healing labor market as well as rising consumer confidence. U.S. consumer confidence rose further in December, suggesting that the economy would continue to expand in 2022. More consumers planned to buy houses and big-ticket items such as motor vehicles and major household appliances as well as go on a vacation over the next six months.

However, the resurgence COVID-19, Fed’s taper talks and consistently high inflation have kept the stock market edgy throughout the year. The Fed plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and 120 billion from the start of the pandemic through November. The move indicates a solid U.S. economy despite higher inflation.

The consumer price index (“CPI”) jumped 6.8% year over year in November, the highest level since June 1982 when inflation hit 7.1%. The economy is nearing full employment, with the unemployment rate dropping to a pandemic-era low of 4.2%.

We have profiled the above-mentioned ETFs in detail below:

First Trust ISE-Revere Natural Gas Index Fund (FCG) – Up 102.5%

Natural gas is surging on tightening supplies and low inventories, providing an upside to the natural gas stocks and ETFs. First Trust ISE-Revere Natural Gas Index Fund offers exposure to U.S. companies involved in the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 43 stocks in its basket.

First Trust ISE-Revere Natural Gas Index Fund has amassed $437.8 million in its asset base while charging 60 bps in annual fees. Volume is good, with 1.3 million shares exchanged per day on average. The product has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

SPDR S&P Homebuilders ETF (XHB) – Up 49.3%

The housing market has been on a tear buoyed by lower mortgage rates, skyrocketing demand and limited supplies. The thirst for home buying is rising even in the face of increasing housing prices, thus providing huge profits to homebuilders. SPDR S&P Homebuilders ETF provides exposure to homebuilders with a well-diversified exposure across building products, home furnishing, home improvement retail, home furnishing retail and household appliances. It tracks the S&P Homebuilders Select Industry Index, holding 35 stocks in its basket.

SPDR S&P Homebuilders ETF is the most popular option in the homebuilding space with AUM of $2.5 billion and charges 35 bps in annual fees. The product trades in an average daily volume of 2.6 million and has a Zacks ETF Rank #2 with a High risk outlook.

Invesco Dynamic Semiconductors ETF (PSI) – Up 47.2%

Semiconductor stocks have been rallying as the pandemic has bolstered demand for chips by leaps and bounds, leading to the worst global shortage in many years. Invesco Dynamic Semiconductors ETF tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket with each making up for less than 6% share each.

Invesco Dynamic Semiconductors ETF has AUM of $945.2 million and sees a moderate average daily volume of 48,000 shares. Expense ratio is 0.56%. PSI has a Zacks ETF Rank #1.

iShares North American Tech-Multimedia Networking ETF (IGN) — Up 43.5%

The technology sector has been riding high on improving economy that has resulted in higher IT spending. iShares North American Tech-Multimedia Networking ETF provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. It holds 22 securities in its basket.

iShares North American Tech-Multimedia Networking ETF has accumulated $147.9 million in its asset base and charges 43 bps in annual fees. The product sees a lower volume of around 17,000 shares a day and carries a Zacks ETF Rank #2 with a High risk outlook.

SPDR S&P Retail ETF (XRT) – Up 41.9%

The retail sector has been doing well thanks to increased consumer confidence and spending. Additionally, holiday sales surged the most in nearly two decades powered by soaring e-commerce sales as well as a rush to stores. SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid-and small-cap retail stocks. It holds well-diversified 109 stocks in its basket.

SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in Internet & direct marketing retail, apparel retail, automotive retail and specialty stores. SPDR S&P Retail ETF is the largest and most popular in the retail space with AUM of $762.7 million and an average trading volume of 3.4 million shares. It charges 35 bps in annual fees. SPDR S&P Retail ETF has a Zacks ETF Rank #1.