According to some myths, the first year of a presidency is generally the worst for the stock market but President Obama's first year of his second term proved to be an exception.
In fact, 2013 was the banner year for the U.S. stock market with the biggest annual gain for the S&P 500 in 16
years and for Dow in 18 years.
Additionally, the U.S. economy is growing at the fastest pace in nearly two years with falling jobless claims, housing market recovery, robust retail sales, narrowing budget deficit and increasing consumer confidence (read: 3 Top Ranked ETFs That Will Crush the Market in 2014).
Overall, the first year of Obama’s second term was positive for the market and the economy but some corners of the market have flourished more than other sectors. Below, we have highlighted three best performing sectors and the related ETFs that have benefitted hugely during President Obama’s first year of the second term.
The clean energy world has been the biggest winner from Obama’s second term thanks to the new ‘Climate Change Action Plan’ and the favorable green energy trends. Additionally, the depletion of fossil fuel reserves, higher oil and gas prices as well as efficient alternative energy applications have made clean power more viable, injecting optimism into the sector.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
This fund tracks the Nasdaq Clean Edge Green Energy Index and managed assets worth $117.8 million. It charges 60 bps in fees per year while volume is light suggesting a wide bid/ask spread (read: Will the Clean Energy ETF Surge Continue in 2014?).
In total, the product holds 43 securities in its basket with largest allocations to Tesla Motors (TSLA), Cree (CREE) and Linear Technology (LLTC). These firms together make up for 25.41% of total assets. The ETF provides a nice mix to mid and small caps with at least 40% share each. From a sector look, technology firms dominate this ETF, accounting for nearly two-fifths of the assets while oil & gas, and industrials round off to the next two spots.
QCLN surged nearly 94% in the trailing one-year period and is expected to outperform this year as well given that it has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a ‘High’ risk outlook.
Healthcare stocks, in particular biotech, have seen an incredible run largely driven by the Affordable Care Act – often known as Obamacare – which ensures a larger base of insured persons across the U.S. This suggests increased revenues for these companies, thereby limiting the debt burden at hospitals or other healthcare service centers.
Further, an aging population, mergers & activities, ever-increasing healthcare spending and promising new drugs added to the bullish outlook on the sector (read: Obamacare Will Be Amazing for These Stocks and ETFs).
PowerShares Dynamic Biotechnology & Genome Portfolio (PBE)
This ETF follows the Dynamic Biotechnology & Genome Intellidex Index. The product sees moderate volume of more than 61,000 shares a day and a decent level of about $324.6 million in AUM. The fund charges 63 bps in fees and expenses from investors.
Holding 30 stocks, the fund is moderately concentrated on its top 10 holdings at nearly 42% with Illumina (ILMN), Alexion Pharmaceuticals (ALXN) and Neurocrine Biosciences (NBIX) as the top three firms. The product is well spread out across market spectrums with large caps (35%), mid caps (30%) and small caps (36%).
The fund added over 68% in the trailing one-year period and this trend is expected to continue in the coming months given the Zacks ETF Rank of 1 or ‘Strong Buy’ rating with ‘Medium’ risk outlook on the fund (read: Inside Biotech ETFs: Can the Run Continue?).
In Obama’s second term, the industrial sector is flourishing as economy is gaining strong traction. Upbeat manufacturing data, improving domestic demand for industrial equipment, lower energy prices, declining unemployment rate, higher wages, lower energy prices and improving fundamentals in Europe and China are fueling growth in the sector.
This trend is expected to continue as we move ahead in 2014 (see: all the Industrial ETFs here).
PowerShares Dynamic Industrials Sector Fund (PRN)
This ETF provides exposure to 59 companies evaluated on investment merit criteria which includes price momentum, earnings momentum, quality, management action and value. This is done by tracking the Dynamic Industrials Sector Intellidex Index (read: 3 ETFs to Profit from the Manufacturing Upswing).
The product is well balanced across each security as none of these accounts for more than 2.82% share in the basket. Southwest Airlines (LUV), Ingersoll-Rand (IR) and Pentair (PNR) occupy the top three positions in the basket. Further, the fund is well diversified across various market spectrums. In terms of sector, aerospace and defense takes the top spot at 22%, closely followed by machinery (19%) and commercial services & supplies (18%).
The fund has amassed $146.2 million in its asset base while trades in light volume of under 33,000 shares a day. The ETF charges 65 bps in annual fees and gained over 45% over the trailing one-year period. PRN has a Zacks Rank of 2 or ‘Buy’ rating with a ‘Low’ risk outlook.
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