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ETF Areas Thriving During Coronavirus Pandemic

Sweta Jaiswal, FRM
·6 min read

There are no doubts about 2020 being a tough year. Apart from the coronavirus outbreak, investors dealt with the U.S. elections-induced volatility, geo-political controversies and simmering Sino-US tensions.

Despite the adversities, investors continued to focus on opportunities for their portfolios, thanks to the new normal. Online activities gained popularity among the masses over the past few months and are expected to continue dominating the post-pandemic era largely. The pandemic is also believed to have changed the lifestyle and preferences of Americans and people globally.

Against this backdrop, we highlight some ETF areas that held their ground and gained popularity among investors amid the coronavirus crisis:

Sustainable Investing ETFs

The health crisis has also impacted the investing world, with market participants showing greater interest in conscious investing, spurring demand for environmental, social and governance (“ESG”) funds. According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, total U.S.-domiciled sustainably invested assets under management, including institutional and retail, rose 42% to $17.1 trillion compared with $12 trillion between 2018 and 2020, per a CNBC article. Going on, MSCI’s Linda-Eling Lee has said to CNBC’s “ETF Edge” that ESG-themed investments should stay in demand considering the growing interest in sustainable and socially-responsible investing following an “extraordinary year” in 2020, as mentioned in a CNBC article.

Not only the coronavirus pandemic but other factors like protests against racism, geo-political tensions and changing climatic conditions are responsible for the growing popularity of sustainable investing funds. Riding on the surging demand, ESG funds are witnessing record inflows this year. Notably, ESG investing has shown some resilience and continues to gain investor attention amid the pandemic.

To gain exposure to ESG investments, investors can consider iShares ESG MSCI USA ETF ESGU, Xtrackers MSCI USA ESG Leaders Equity ETF USSG, Vanguard ESG U.S. Stock ETF (ESGV) and Nuveen ESG Large-Cap Growth ETF (NULG) (read: ESG ETFs to Keep Shining Bright on Increasing Popularity).

Video Gaming ETFs

Video game player count continued to increase in 2020, with the health crisis forcing people to stay at home. Moreover, the boom in the video gaming space may remain post-pandemic as the outbreak has changed the lifestyle and preferences of Americans to a large extent.

Going by new data from The NPD Group, the video game industry, including packaged media, digital, consoles and accessories, saw strong sales in November with people spending a total of around $6.97 billion, as mentioned in a Media Play News article. Notably, the figure is also up 35% year over year. The upside was led by an impressive $1.4 billion in hardware spending on new-generation consoles. Going on, strength in sales of Microsoft Xbox Series X and Series S units along with PlayStation 5 led to a 58% year-over-year rise in hardware sales as against $886 million in the year-ago period. Furthermore, there was a 32% rise in software revenues to $5.24 billion from $3.96 billion in the previous year. In fact, total video game spending rose 22% to $44.5 billion through the first 11 months of 2020, from $36.47 billion last year, per data from The NPD Group.

Thus, investors can look at VanEck Vectors Video Gaming and eSports ETF ESPO, Global X Video Games & Esports ETF HERO and Wedbush ETFMG Video Game Tech ETF (GAMR) (read: Get Your Portfolio Christmas-Ready With These ETFs).

Biotech ETFs

The biotechnology sector has kept its promise of returns so far. From vaccine-related positive news to progress in the development of cell therapies for addressing coronavirus, all kept the sector surging. Notably, the race to introduce a vaccine and treatment of coronavirus is opening up opportunities, making the biotech sector a prospective space for investments. Notably, the two frontrunners in the COVID-19 vaccine race, namely, Moderna (MRNA) and Pfizer/BioNTech, have received the emergency use authorization from the FDA for their coronavirus vaccines along with various approvals in several other countries. Going on, Sanofi (SNY), GlaxoSmithKline (GSK) and Johnson & Johnson (JNJ) are progressing in the development of coronavirus vaccines and will likely be ready to roll out the same in 2021.

Notably, a few ETFs with considerable exposure to the biotech space are iShares Nasdaq Biotechnology ETF IBB, SPDR S&P Biotech ETF XBI, First Trust Amex Biotechnology Index (FBT), ARK Genomic Revolution ETF (ARKG) and VanEck Vectors Biotech ETF (BBH) (read: Wil Nasdaq ETFs Win in 2021 After the Best Year Since 2009?).

Cloud Computing ETFs

Cloud computing is seeing increasing usage globally as it enables data interoperability in a scalable and cost-efficient way through data collection, processing and analyzing. Cloud computing and storage have empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. It has also found applications in social networking, messaging apps and streaming services. Cloud computing is also supporting organizations in remotely processing a lot of information, developing and running key applications and services.

In the wake of the pandemic, cloud technology adoption has seen robust growth in sectors where the work-from-home initiatives helped sustain business functions. By 2022, the public cloud services market is projected to hit $364.1 billion, up 50% from $242.7 billion in 2019, according to the Gartner report. Thus, investors can consider First Trust Cloud Computing ETF SKYY, Global X Cloud Computing ETF CLOU and WisdomTree Cloud Computing ETF (WCLD) (read: Best Thematic ETFs: Telemedicine, Cloud, IoT & More).

E-Commerce ETFs

Online shopping is gaining favor among shoppers in an attempt to minimize human-to-human contact as coronavirus cases continue to surge in the United States. A report by Mastercard SpendingPulse highlights the same. Keeping up with the digitization trend, online sales surged 49% from 2019 levels. Online sales also accounted for roughly 19.7% of overall retail sales, up from about 13.4% in 2019. Notably, the pandemic has been a boon for the e-commerce industry as people continue to prefer staying indoors and shop online.

Going by a Statista report, the global e-commerce market is expected to touch $3.3 trillion by 2025, at a CAGR of 7.4% between 2020 and 2025.

Against this backdrop, let’s look at some ETFs that can benefit from the new shopping trend -- Amplify Online Retail ETF IBUY, ProShares Long Online/Short Stores ETF CLIX, ProShares Online Retail ETF (ONLN) and Global X E-Commerce ETF (EBIZ) (read: Top Performing ETF Areas of 2020).

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Global X Video Games & Esports ETF (HERO): ETF Research Reports
 
iShares Nasdaq Biotechnology ETF (IBB): ETF Research Reports
 
SPDR S&P Biotech ETF (XBI): ETF Research Reports
 
Amplify Online Retail ETF (IBUY): ETF Research Reports
 
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
 
ProShares Long OnlineShort Stores ETF (CLIX): ETF Research Reports
 
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
 
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
 
Global X Cloud Computing ETF (CLOU): ETF Research Reports
 
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
 
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