For the first time in nearly a decade, the Fed opted for a lift-off last week indicating that the economy has gained enough strength to bear future increases in borrowing costs. Significant improvements in the key sections of the economy including that in the labor market were the main reasons behind the hike. Expressing confidence in the U.S. economy, Fed Chair Janet Yellen announced the beginning of a slow-but-steady series of rate increases.

The Fed increased its short-term borrowing rate to a range of 0.25% to 0.50% as policy makers unanimously voted in favor of a hike. The long wait for the hike was what Janet Yellen labelled an “extraordinary period.” During this period, ultra-low interest rates aided economic recovery, lending a bull run to the markets (read: Fed Finally Hikes Rates: Quality ETFs & Stocks to Buy Now).

 Following the lift-off decision, Yellen stated that the decision “reflects our confidence in the U.S. economy.” The Fed also indicated that “solid” consumer spending, a rebound in the housing market and strong business fixed investment played an important role in the decision. 
 
How the Markets Moved Post Hike?  
 
Though the highly anticipated hike helped the broader benchmarks to move northward, markets failed to extend the gains due to concerns including the slump in oil prices. Despite yesterday’s gains, the Dow, S&P 500 and Nasdaq lost 2.4%, 1.8% and 1.3%, respectively. Oil was the main reason behind the benchmarks slipping into negative territory following the rate-hike decision.
 
Concerns regarding weak global demand, absence of production cuts from OPEC and North American shale suppliers, and a stronger dollar continued to weigh on oil prices, which in turn affected energy shares during the period. The broader energy index – Energy Select Sector SPDR ETF (XLE) – declined nearly 5.4% in this time frame (read: No Respite for Oil and Energy ETFs in 2016?).
 
However, the alternative energy sector moved in the opposite direction thanks to some important developments. The historic Paris Climate Deal and news on tax credit extension boosted the sector during this period. The Paris deal, in which about 195 countries agreed to a landmark treaty to curb global warming to a significant extent, will invariably motivate renewable energy companies to step up their investments in new technologies, boosting the industry’s growth prospects. Meanwhile, the unexpected approval of a five-year extension to the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for solar and wind companies by the U.S. government also boosted the stocks (read: Inside the Recent Surge in Clean Energy ETFs).
 
3 ETF Winners 
 
In this scenario, we have highlighted three ETFs that registered healthy gains in the post rate-hike period.
 
Guggenheim Solar ETF (TAN - ETF report)

This ETF follows the MAC Global Solar Energy Index, holding 31 stocks in the basket. American firms dominate the fund’s portfolio with nearly 50.9% share, followed by Hong Kong (19.8%) and China (17.5%). The product has amassed $323.8 million in its asset base and trades in moderate volume of around 226,000 shares a day. It charges investors 70 bps in fees per year. The fund has returned 7.7% in the post rate hike period.
 
Market Vectors Mortgage REIT Income ETF (MORT - ETF report)
 
The ETF tracks the Market Vectors Global Mortgage REITs Index, measuring the performance of companies primarily engaged in the purchase or service of commercial or residential mortgage loans. The fund consists of 24 stocks and charges 41 bps in investor fees per year. The fund is relatively less popular with an asset base of $102.2 million and average volume of roughly 31,000 shares per day. The commitment of a gradual increase in the key interest rate helped the fund to return 4.6% in the post rate hike period (read: Watch These Income ETFs as Fed Meets).
 
SPDR S&P Biotech ETF (XBI - ETF report)
 
This ETF follows the S&P Biotechnology Select Industry Index, holding 105 stocks in the basket. The fund has a well diversified portfolio as none of the firms has more than 1.7% of assets. The fund is quite popular with an asset base of $2.8 billion and strong average volume of more than 4 million shares per day. It charges investors 35 bps in fees per year. The fund has returned 4.7% in the post rate hike period.