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4 Sector ETFs That Crushed S&P 500 in Decade-Old Bull Run

Sanghamitra Saha

The S&P 500’s bull market will turn 10 years tomorrow. On this very day, 10 years ago, stocks bottomed out only to warm up to an amazing recovery from the deepest recession since the Great Depression.

The collapse of Lehman Brothers in September 2008 wreaked havoc on Wall Street. And on Mar 9, 2009, the broader S&P 500 was below 700 for the first time in 13 years. But all this is history today as the S&P 500 is now trading at $2,771.45 (as of Mar 6, 2019).

The bull market turned the longest on Aug 22, 2018 in the history of the U.S. equity market. The key index successfully passed 3,650 days without a 20% decline and was crowned the best. 

The total market capitalization of the S&P 500 is now about $23.36 trillion compared with $5.89 trillion 10 years ago. The Fed’s quantitative easing and rock-bottom interest rate policy in order to boost a struggling economy took Wall Street to this height.

While several sectors performed impressively, some outshone. If we look at the ETF world, we’ll see that the S&P 500-based fund SPDR S&P 500 ETF SPY returned about 386.8% in this decade-long bull market while the Technology and Consumer Discretionary sector just sizzled.

What’s Behind the Market Success?

The unemployment rate at the start of the bull market was 8.3% while it was 4.0% in January 2019. Wage growth in the United States has also picked up in recent times. Most central banks in the developed economies have been pursuing easy money policies, resulting in greater affordability.

Though several foreign economies are slowing, the U.S. economy advanced an annualized 2.6% sequentially in the fourth quarter of 2018, beating market expectations of 2.4% expansion.In contrast, the final GDP reading in March 2009 came up with a year-on-year contraction of 5.7%, as per Reuters.

Sector ETF Winners

Technology

The emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, virtual reality devices, and artificial intelligence as well as strong corporate earnings are acting as the key catalysts for the sector.

First Trust Dow Jones Internet ETF (FDN) – Up 931.4%

First Trust NASDAQ-100-Tech Sector ETF (QTEC) – Up 673.9%

Biotech

Successful clinical trials for new drugs & FDA approvals, higher demand from emerging markets, and stronger merger and acquisition activity have held the key to the success of this sector in recent times. In fact, biotech stocks have seen their best-ever start to a year since 2012 (read: What's Behind the Biotech ETF Rally to Start 2019?). 

First Trust NYSE Arca Biotech ETF (FBT) – Up 737.8%

SPDR S&P Biotech ETF (XBI) – Up 510%

Consumer Discretionary

After years of stagnation, the U.S. job market has now gathered steam, giving many lower income consumers some extra cash. The tax-reform passed in 2018 was also an added advantage. Low fuel prices for the last four years continued to make consumers’ wallets fatter.

Vanguard Consumer Discretionary ETF (VCR) – Up 662.7%

Consumer Discretionary Select Sector SPDR ETF (XLY) – Up 673.9%

Healthcare

This sector is a bit defensive in nature. The aging population, growing demand in emerging markets and product launches are the positives of the sector. In last year’s trade tension-induced selloffs, healthcare stocks held their head high due to their non-cyclical nature.

First Trust Health Care AlphaDEX ETF (FXH) – Up 504.8%

Invesco Dynamic Pharmaceuticals ETF (PJP) – Up 500.9%

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Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
 
First Trust NYSE Arca Biotechnology Index Fund (FBT): ETF Research Reports
 
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
 
First Trust Health Care AlphaDEX Fund (FXH): ETF Research Reports
 
First Trust Dow Jones Internet Index Fund (FDN): ETF Research Reports
 
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
 
SPDR S&P Biotech ETF (XBI): ETF Research Reports
 
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
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