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5 Top-Ranked ETFs That Outperformed the Market in October

Studying the October rally, we highlight some top-ranked ETFs that have outperformed the market in the last month.

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This story originally appeared on Zacks

Investors remained optimistic in October, enjoying the upbeat third-quarter earnings season. The stock market rallied impressively despite concerns surrounding the rising material prices from supply-chain disturbances, COVID-19 uncertainty and Federal Reserve’s tapering concerns. In fact, all the three major averages closed at a record for the third trading session in a row on Nov 2.

- Zacks

The central bank is expected to roll back the month-end bond purchases by cutting $10 billion of $80 billion a month in Treasuries and $5 billion from $40 billion a month in mortgage-backed securities (per a CNBC article). If everything goes well, the Federal Reserve expects to finish off tapering by mid-2022.

Market pundits are crediting the stupendous rally to the impressive earnings season. Notably, 83% of the S&P 500 companies that reported earnings results have surpassed analysts’ earnings estimates as of Nov 2, per the FactSet data (according to a CNBC article). The earnings results have also erased investors’ worries stemming from the rising supply-chain disturbances, gradually eroding the corporate profit margins.

The ongoing optimism in the market is keeping investors optimistic about the year-end rally. In this regard, Keith Lerner, co-chief investment officer at Truist, has commented that “The primary market trend appears higher. In the eight periods since 1950 where stocks were up more than 20% through October, as they are this year, the S&P 500 tacked on additional gains by year end 100% of the time with an average gain of 6.2%,” as stated in a CNBC article.

Studying the October rally, here we highlight some top-ranked ETFs that have outperformed the market over the last month:

Invesco DWA Industrials Momentum ETF PRN — up 16.3% in the past month

The industrial sector has been attracting investor attention as the gradual reopening of U.S. and global economies highlights brighter prospects. Consumer confidence in the United States rose in October primarily on the heels of easing Delta variant concerns, improving labor market conditions, rebounding U.S. economy from the pandemic-led slump and accelerated coronavirus vaccine rollouts.

The fund seeks to provide investment results that, before expenses, match the performance of the Dorsey Wright Industrials Technical Leaders Index. Its expense ratio is 0.60%. The fund sports a Zacks ETF Rank #2 (Buy) with a Medium-risk outlook (read: Beyond Clean Energy, 5 Sector ETFs Soaring to Record Highs).

SPDR S&P Semiconductor ETF XSD — up 15.4%

The semiconductor industry has been increasingly gaining investors' attention backed by its bright prospects. The coronavirus-induced work-from-home and web-based learning trends have spurred demand for chips from PC manufacturers and data-center operators. The increasing importance of Hybrid cloud among enterprises is attracting investments from large public cloud providers, including Amazon Web Services, Microsoft Azure, Google Cloud, International Business Machines and Oracle. The data-center chip providers will likely gain from this trend.

This ETF follows the S&P Semiconductor Select Industry Index. It charges 35 basis points (bps) in fees a year from investors. It flaunts a Zacks ETF Rank #1 (Strong Buy), with a High-risk outlook (read: 5 Top-Ranked Chip ETFs to Gain on Ongoing Supply Crisis).

The Consumer Discretionary Select Sector SPDR Fund XLY — up 12.5%

Consumers seem to be looking forward to buying homes, motor vehicles and major household durables. In fact, the buying attitude for vehicles and homes is expanding. The survey also showed that the proportion of the population planning to go on vacation has shot up to the highest level since February 2020, as mentioned in a Reuters article.

The Conference Board's measure of consumer confidence index stands at 113.8 in comparison to 109.8 in September. The metric has finally broken the streak of three consecutive monthly declines. October’s reading also beat the consensus estimate of the metric, coming in at 108.3, per a Reuters’ poll. The metric continues to be below the pre-pandemic level of 132.6 in February 2020.

This is the largest and the most popular product in the consumer discretionary space. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 bps in fees per year and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: ETFs Riding on Tesla's Surge).

Invesco DWA Technology Momentum ETF PTF — up 12.4%

Technology plays an instrumental role amid the COVID-19 uncertainty in aiding people to maintain safe-distancing norms. As the U.S. economy was reopening, an increasing number of American shoppers were seen to be visiting stores for some retail therapy. However, with the surging Delta variant cases, shoppers are expected to resort to online shopping again.

Certain other ‘new normal’ trends have also emerged amid the health crisis like work from home, increasing digital payments, growing video streaming and soaring video game sales. The pandemic is also a boon for the e-commerce industry as people continue staying indoors and shopping online for all essentials, especially food items.

The fund seeks to provide investment results that, before expenses, match the performance of the Dorsey Wright Technology Technical Leaders Index. Its expense ratio is 0.60% and carries a Zacks ETF Rank #2, with a High-risk outlook

First Trust Nasdaq Transportation ETF FTXR — up 10.9%

This holiday season appears to be a comparatively strong period for retailers. Moreover, the growing inclination toward e-commerce has resulted in a wider reach for players in the retail space. That’s why there is likely to be a surge in demand for freight services to deliver the products ordered online.

This ETF follows the Nasdaq US Smart Transportation Index. It charges 60 bps in fees a year from investors. It flaunts a Zacks ETF Rank #2.



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Invesco DWA Industrials Momentum ETF (PRN): ETF Research Reports

 

Invesco DWA Technology Momentum ETF (PTF): ETF Research Reports

 

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

 

SPDR S&P Semiconductor ETF (XSD): ETF Research Reports

 

First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports

 

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Zacks Investment Research