Red Hot ETF Areas Amid The Coronavirus Crisis

The rapidly spreading coronavirus outbreak seems to have unnerved market participants in July as the total number of cases have crossed 4.4 million with at least 150,000 deaths, per a CNN report. Also, the U.S. economy’s second-quarter GDP’s most devastating plunge of 32.9% on an annualized basis, according to the Commerce Department’s first reading of the data, dented investors’ optimism (per a CNBC article).

Moreover, the rising number of coronavirus cases in the United States hurt consumer confidence in July as consumers become worried about the job prospects and business conditions across the nation. The Conference Board's measure of consumer sentiment index stands at 92.6, comparing unfavorably with June’s reading of 98.3.

Investors are fearing that another round of business restrictions and lockdown measures might derail the economic recovery achieved so far. Meanwhile, looking at the aggravating pandemic situation in states like California, Texas, Florida and Oregon along with others, it is no wonder that the reopening process might take a beating. Also, raising concerns, some states are now short of hospital beds while testing labs are flooded with samples.                

Against this backdrop, let’s look at some ETF areas that will continue to be strong investing options:

Biotech ETFs

The race to introduce vaccine and treatment of coronavirus is breeding opportunities, making the biotech sector a prospective space for investments. From vaccine-related positive news to progress in the development of cell therapies for addressing coronavirus, all kept the sector surging.

Favorable updates on two vaccine candidates being made by Moderna (MRNA) and Pfizer (PFE) in collaboration with German biotech firm BioNTech came to the fore. These companies began the late-stage study on their coronavirus vaccines. Other vaccine developers that are being supported by the Operation Warp Speed are also nearing the late-stage trials. This includes an experimental vaccine being developed in collaboration with the University of Oxford and AstraZeneca (AZN), a vaccine candidate from Johnson & Johnson (JNJ) and another one from the biotechnology company Novavax (NVAX), per a Washington Post article.

Notably, a few ETFs with considerable exposure to the biotech space are iShares Nasdaq Biotechnology ETF IBB, SPDR S&P Biotech ETF XBI, First Trust Amex Biotechnology Index FBT, ARK Genomic Revolution ETF (ARKG) and VanEck Vectors Biotech ETF (BBH).

Internet ETFs

The second half of 2020 is expected to continue bearing the brunt of the pandemic as its second wave is gathering steam.In the current scenario, the rising work-from-home and online-shopping trends, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With these new trends gaining momentum, the Internet will remain a major requirement in daily lives.

More and more people are spending time at home, in line with social-distancing guidelines due to the pandemic woes. Most surveys found that people are more interested in online shopping rather than visiting a brick-and-mortar store for purchases of essential food items and supplies now. It is also observed that the coronavirus-induced shutdown boosted demand for video games. 

Against this backdrop, let’s look at some internet ETFs that will consistently gain traction from the spurt in demand for online gaming, shopping, video streaming and remote working trends due to the coronavirus crisis: First Trust Dow Jones Internet Index FDN, ARK Next Generation Internet ETF ARKW, Invesco NASDAQ Internet ETF PNQI, O’Shares Global Internet Giants ETF OGIG and Global X Internet of Things ETF (SNSR).

Sustainable Investing ETFs

The coronavirus outbreak directed attention toward conscious investing, driving demand for environmental, social and governance (ESG) funds. Going by Morningstar Direct’s data, investors spent at least $12.2 billion on ESG funds in the first four months of 2020, per The Wall Street Journal report. Rising awareness of ESG funds among companies marked by continued technological advancement and digital revolution have been closely observed since the pre-pandemic era.

Notably, ESG investing has shown some resilience and continues to gain investor notice amid the coronavirus pandemic. The Wall Street Journal’s report also highlights the resilience of ESG funds, which mostly generated better-than-average returns in comparison to the broader S&P 500 Index. Considering the report, more than 70% ESG funds across all asset classes generated higher returns than their counterparts through the first four months of 2020.

To gain exposure to ESG investments, investors can consider iShares ESG MSCI USA ETF ESGU, Xtrackers MSCI USA ESG Leaders Equity ETF USSG, Vanguard ESG U.S. Stock ETF ESGV and Nuveen ESG Large-Cap Growth ETF (NULG).

Disclosure: 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 specific ...

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