5 Top-Performing Sector ETFs Of July

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Wall Street is poised to wrap up the month of July with strong gains buoyed by better-than-expected earnings, receding inflation pressure, rounds of upbeat economic data, and hopes that the Fed's monetary policy tightening is coming to an end.

The gains were broad-based and well spread out across various segments. Some of the top performers in the ETF space from different corners of the market include Defiance Pure Electric Vehicle ETF (EVXX - Free Report), First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT - Free Report), SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report), SPDR S&P Regional Banking ETF (KRE - Free Report) and Roundhill MEME ETF (MEME - Free Report).

The S&P has experienced a 3% increase, marking its fifth consecutive positive month, a streak not seen since the seven-month period ending in August 2021. The tech-heavy Nasdaq Composite Index has gained 3.8%, putting it on course for its fifth consecutive winning month as well. Meanwhile, the Dow Jones was an outperformer with a 13-day advance last week, matching the index's longest streak of gains. The blue-chip index is up 3.1% in July. 

Inflation in the United States has cooled down for the 12th consecutive month in June which will likely push the Fed closer to ending its fastest interest rate hiking cycle since the 1980s. Additionally, improving economic indicators, such as strong job numbers, rising consumer spending, and robust manufacturing activity have added to the strength.

The American economy surprisingly picked up steam in the second quarter, thanks to resilience among consumers and businesses in the face of high-interest rates. This is especially true as the GDP grew 2.4% annually from 2% growth in the first quarter.

Moreover, the picture emerging from the Q2 earnings season is one of continued resilience and strength, with an above-average proportion of companies not only beating estimates but also providing reassuring guidance for the coming periods. Per the latest Earnings Trends report, the companies that have reported results so far are up 3.1% on 6.9% higher revenues, with 81.5% beating EPS estimates and 63.6% beating revenue estimates.

In its latest meeting, the Fed, as widely expected, raised interest rates by a quarter-percentage point to the highest level since March 2001 and signaled the possibility of further increases ahead. This marked the 11th rate increase in more than a year, a streak that has made mortgages and other consumer and business loans increasingly expensive.

ETFs in Focus

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

Defiance Pure Electric Vehicle ETF (EVXX) – 53.2%

U.S. electric vehicles hit a record in the second quarter, with almost 300,000 new battery-electric vehicles sold. The surge came despite many vehicle models losing their eligibility for federal and some state incentives. The EV market is on track to break the 1 million mark in 2023, which would be an unprecedented figure and a milestone for the industry.

Defiance Pure Electric Vehicle ETF is an actively-managed fund that seeks to track the performance of a basket of common shares, which are equally weighted on a quarterly basis, of the five largest (by market capitalization) electric vehicle manufacturers included in the Solactive Pure US Electric Vehicle Index. It charges 68 bps in annual fees. Defiance Pure Electric Vehicle ETF debuted in the space in June and has accumulated $5.4 million since then. It trades in a light volume of 13,000 shares.

First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT) – Up 29.4%

The surge in bitcoin prices to a new one-year high has led to a spike in crypto stocks. First Trust SkyBridge Crypto Industry and Digital Economy ETF is designed to provide exposure to companies that SkyBridge believes are driving cryptocurrency, crypto assets, and digital economies-related innovation. SkyBridge identifies securities primarily via “bottom up” research focused on finding companies leading in the crypto industry ecosystem.

First Trust SkyBridge Crypto Industry holds 30 stocks in its basket and charges 85 bps in fees per year from investors. It has amassed $26 million in its asset base and trades in an average daily volume of 28,000 shares.

SPDR S&P Oil & Gas Equipment & Services ETF (XES) – Up 23.4%

Oil prices are on track to post their biggest monthly gains in over a year on expectations that Saudi Arabia would extend voluntary output cuts into September and tighten global supply. While most energy ETFs have gained handsomely, SPDR S&P Oil & Gas Equipment & Services ETF is leading the pack. It tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry.

XES holds 33 stocks in its basket with AUM of $343.9 million. SPDR S&P Oil & Gas Equipment & Services ETF charges 35 bps in fees per year from investors and trades in an average daily volume of 95,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook.

SPDR S&P Regional Banking ETF (KRE) – Up 19.5%

A rise in interest rates can lend some support to the banking stocks as they seek to borrow money at short-term rates and lend at long-term rates. With the rise in short-term interest rates, banks will be able to earn more on lending and pay less on deposits. This will expand net margins and bolster banks’ profits. In particular, the ultra-popular SPDR S&P Regional Banking ETF has gained the most. The product follows the S&P Regional Banks Select Industry Index, holding 139 securities in its basket.

SPDR S&P Regional Banking ETF has an AUM of $3.7 billion and charges 35 bps in annual fees. It trades in an average daily volume of 21 million shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.

Roundhill MEME ETF (MEME) – Up 18.3%

The rise in the risk appetite of investors brought back the appeal for meme stocks. Investors were fascinated with meme stocks once again in July, hunting through lower-quality names searching for returns. Roundhill MEME ETF is the first ETF globally explicitly designed to track the performance of meme stocks. It follows the Solactive Roundhill Meme Stock Index, which consists of equal-weighted U.S.-listed equity securities that exhibit a combination of elevated social media activity and high short interest. Roundhill MEME ETF holds 25 stocks in its basket.

Roundhill MEME ETF has gathered $3.3 million in its AUM and charges 69 bps in annual fees. It trades in a volume of 3,000 shares a day on average.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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