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5 Top-Ranked ETFs That Outperformed Wall Street in 2021

Let's look at some top-ranked ETFs that have outpaced the Wall Street rally this year and are up at least 40%.

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This story originally appeared on Zacks

The year 2021 has been all about fighting the pandemic and several COVID-19 variants, accelerating the rollout of vaccines and improving employment conditions helping the economy rebound from the pandemic lows. It has also been the year of consistent and strong Federal Reserve’s support in maintaining liquidity in the markets, the passage of new bills by the President Joe Biden’s government, witnessing meme stock frenzy and crypto mania along with high inflation levels.

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However, the major market indices have remained in the green zone and rewarded the investors with a rally. The S&P 500 and Dow Jones Industrial Averages have climbed 27.6% and 19.2%, respectively, in 2021. The Nasdaq Composite has risen 22.3%, while the Russell 2000 has increased 13.9% in the year.

In this regard, Anu Gaggar, global investment strategist for Commonwealth Financial Network, has said that “2021 was a terrific year for the equity markets. Between federal stimulus keeping the economy going, easy monetary policy from the Fed keeping markets liquid and interest rates low, and the ongoing medical improvement leading to surprising growth, markets have been in the best of all possible worlds,” according to a CNBC article.

Top-Ranked ETFs Outpacing Wall Street in 2021

Here we highlight some top-ranked ETFs that have outpaced the Wall Street rally this year and are up at least 40%.

First Trust Natural Gas ETF FCG — up 99.9% in 2021

Investors have been closely tracking the energy sector, which has been showing strength as the global demand and economic growth levels are on the path of recovery from the pandemic-led slump. The coronavirus vaccine rollout is gradually helping control the outbreak's spread across the globe. The optimism surrounding the gradual reopening of global economies and increasing demand is painting a rosy picture for cyclical sectors.

According to a CNBC article, energy stocks are on track to witness the best year in more than three decades. The sector has gained more than 47% for the year. Crude prices also increased nearly 60% this year as the demand outlook improves with the economic reopening.

The investment objective of First Trust Natural Gas ETF is to seek investment results that generally correspond to the price and yield, before fees and expenses, of an equity index called the ISE-Revere Natural Gas Index. With AUM of $437.8 million, FCG charges 60 basis points (bps) in fees. First Trust Natural Gas ETF has a Zacks ETF Rank #2 (Buy) (read: 5 Top ETF Stories of 2021 That May Influence 2022 Trends).

SPDR S&P Homebuilders ETF XHB — up 50.1%

The housing market steadily benefited from low borrowing costs and changing demographic preferences of a large chunk of the population as people increasingly looked for work-from-home-friendly properties. Individuals were shifting from city centers to suburbs and other low-density areas, looking for spacious accommodations for home offices and schools, per sources. Though the Fed has turned hawkish, mortgage rates are still near historic lows that are encouraging people to buy more homes, making refinance cheaper. Moreover, a lack of resale inventory, combined with strong consumer demand, supportssingle-family homebuilding.

A popular choice in the homebuilding space, SPDR S&P Homebuilders ETF, follows the S&P Homebuilders Select Industry Index. SPDR S&P Homebuilders ETF holds about 35 securities in its basket. XHB has AUM of $2.49 billion. SPDR S&P Homebuilders ETF charges 35 bps in annual fees. SPDR S&P Homebuilders ETF carries a Zacks ETF Rank #2 (read: Millennials to Inherit as Much as $68TN? ETFs to Gain).

SPDR Dow Jones REIT ETF RWR — up 48.4%

COVID-19 has kept on causing weakness on the bourses this year. Various measures were taken to curtail the spread, again impacting the economic recovery from the pandemic-led slump. These factors made investors jittery, adding to the lure of Real estate investment trusts (REITs). This is because REITs offer outsized yields and act as good investing options when increased safe-haven trade keeps yields in check. Moreover, real estate or REIT stocks are a good bet in a rising inflation environment. Both, properties’ resale value and rental income increase with price inflation. 

The SPDR Dow Jones REIT ETF seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Dow Jones U.S. Select REIT Index. RWR has AUM of $2.14 billion. SPDR S&P Homebuilders ETF charges 25 bps in annual fees. SPDR Dow Jones REIT ETF carries a Zacks ETF Rank #2 (read: Best ETF Strategies for 2022).

iShares Semiconductor ETF SOXX — up 46.4%

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.

The iShares Semiconductor ETF seeks to track the investment results of an index composed of U.S.-listed equities in the semiconductor sector. SOXX has AUM of $10.20 billion. SPDR S&P Homebuilders ETF charges 43 bps in annual fees. iShares Semiconductor ETF carries a Zacks ETF Rank #1 (Strong Buy) (read: 5 ETFs Trading At New Highs).

SPDR S&P Retail ETF XRT — up 42.8%

Consumers have been battling the rising inflation levels and COVID-19 variant concerns. They seem to be upbeat about accelerated coronavirus vaccine rollout and recovering U.S. economy from the pandemic-led slowdown. High levels of consumer spending and improving employment conditions have kept the retail sector buzzing with opportunities. The U.S. holiday season sales figures are impressive and strong. Going by a Mastercard SpendingPulse report, holiday retail salesin the United States after excluding automotive from Nov 1 through Dec 24 climbed 8.5% year over year.

With AUM of $762.7 million, SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index. XRT holds 109 securities in its basket, each accounting for not more than 1.17% of assets. Internet & direct marketing retail, apparel retail, automotive retail and specialty stores are the top four sectors with a double-digit allocation. SPDR S&P Retail ETF charges 35 bps in annual fees and carries a Zacks ETF Rank #1 (read: What's Making Retail ETFs Great Bets Now? Let's Explore).



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SPDR S&P Homebuilders ETF (XHB): ETF Research Reports

 

SPDR S&P Retail ETF (XRT): ETF Research Reports

 

iShares Semiconductor ETF (SOXX): ETF Research Reports

 

First Trust Natural Gas ETF (FCG): ETF Research Reports

 

SPDR Dow Jones REIT ETF (RWR): ETF Research Reports

 

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Zacks Investment Research