Studying the present market scenario regarding the positive developments in the additional round of fiscal stimulus and coronavirus vaccine development, it seems that Wall Street will witness a rally in March. Recently, the House of Representatives passed President Joe Biden’s $1.9-trillion stimulus package, also known as the American Rescue Plan Act of 2021.
On the vaccine front, the world will now receive the first single-shot vaccine in the battle against the coronavirus pandemic as the FDA awarded the Emergency Use Authorization (EUA) to COVID-19 vaccine that is developed by the Janssen Pharmaceutical Companies of Johnson & Johnson
Also, according to a CNBC article, Federal Reserve Chairman Jerome Powell recently said that a “patiently accommodative” monetary policy is needed to support the economy after observing the sluggish labor market conditions.
Against this backdrop, let’s discuss ETFs, which promise great returns in 2021
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 received the emergency use authorization from the FDA for their coronavirus vaccines along with various approvals in several other countries. Moving on, the FDA awarded an EUA to the COVID-19 vaccine developed by the Janssen Pharmaceutical Companies of Johnson & Johnson. The company also informed that the U.S. Centers for Disease Control and Prevention's (CDC) Advisory Committee on Immunization Practices (ACIP) recommended its COVID-19 vaccine.
Notably, a few ETFs with considerable exposure to the biotech space are iShares Nasdaq Biotechnology ETF, SPDR S&P Biotech ETF, First Trust Amex Biotechnology Index (FBT), ARK Genomic Revolution ETF (ARKG) and VanEck Vectors Biotech ETF (BBH).
In the current scenario,bulls are riding in favor of stocks in the cyclical sectors like industrial, financial, energy and consumer discretionary. Notably, stocks within the cyclical sector mostly behave in tandem with the prevalent economic conditions and when growth returns to normal levels, these sectors will automatically perform well.
Reduction in oil supply, increased fiscal stimulus, rise in industrial production and a weak dollar as the Fed remained super dovish are driving oil prices. The banking industry suffered heavy blows from the coronavirus outbreak. However, the ramp-up in economic activities can offset this downside. In fact, the energy and financials sectors have gained around 28% and 12%, respectively, in the year-to-date period. Let’s look at some popular ETFs belonging to the cyclical sector, which can gain in the present situation. These are Energy Select Sector SPDR, Fidelity MSCI Materials Index ETF and Invesco KBW Bank ETF (KBWB).
Online shopping has gained favor with shoppers in an attempt to minimize human-to-human contact amid the pandemic. According to the Mastercard Spending Pulse, retail sales excluding automotive and gasoline jumped 9.2% year over year in January. This growth was observed across all 50 states as the holiday season shopping momentum continued into January. The upside in January comes on the back of 3% year-over-year growth in sales during the holiday season. Notably, the pandemic has been a boon for the e-commerce industry as people continue to prefer staying indoors and shopping online.
Against this backdrop, let’s look at some of the ETFs that can benefit from this new shopping trend. These are Amplify Online Retail ETF, ProShares Long Online/Short Stores ETF, ProShares Online Retail ETF (ONLN) and Global X E-Commerce ETF (EBIZ).
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 empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. It also found applications in social networking, messaging apps and streaming services. Cloud computing is further supporting organizations in remotely processing a lot of information, developing and running key applications and services.
In the wake of the coronavirus pandemic, cloud technology adoption saw 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, per the Gartner report. Thus, investors can consider First Trust Cloud Computing ETF, Global X Cloud Computing ETF and WisdomTree Cloud Computing ETF (WCLD)
AI, Robotics & Cyber Security
AI is fast changing the business landscape by expanding opportunities, driving revenues and enhancing efficiencies. It helps enhance almost everything including advertising, healthcare, robotics, retail, video streaming, gaming and urban development.
We are living in an era, largely dominated by AI applications and technological advancements. Amid the coronavirus crisis, demand for online services increased, which in turn, led to the dominance of AI. Globally, the AI market is estimated to see a CAGR of 29%, rising from a worth of $42.8 billion in 2019 to $152.9 billion in 2023, according to an Analytics Insight article.
The robotics market is flooded with opportunities as robots are being used for jobs such as sanitizing hospitals, homes and workplaces along with monitoring, surveying, handling, and delivering food and medicines.
However, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. Given the severity of the situation, Cybersecurity Ventures expects worldwide expenditure on cybersecurity to surpass $1 trillion cumulatively from 2017 through 2021. Per a Grand View Research report, the global cyber-security market is expected to reach a value of $241.1 billion, seeing a CAGR of 11% from 2019 to 2025. Accordingly, our investors can consider Global X Robotics & Artificial Intelligence ETF, First Trust Nasdaq Artificial Intelligence and Robotics ETF , ROBO Global Robotics & Automation ETF (ROBO), iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), First Trust NASDAQ CEA Cybersecurity ETF (CIBR) and ETFMG Prime Cyber Security ETF (HACK).