On March 23rd, when the S&P 500 was bottoming out with peak to valley losses of more than 30%, it was difficult to conceive of stocks finishing the year even in the green, let alone posting a gain of 16% by year-end. But that's what we got thanks to a mountain of fiscal support from both the Fed and Congress.
Of course, there were winners and losers in last year's stock market recovery. Tech was the top-performing sector of 2020, marking the 2nd year in a row it posted gains of more than 40%. Despite a comeback during the 4th quarter, energy stocks still managed to lose more than 30%.
Other winners included growth sectors, such as consumer discretionary and communication services, while utilities, financials and real estate were little changed for the year.
There were even bigger gainers in 2020. While there are nearly two dozen different ETFs that posted 100%+ gains, most feel into just a few themes - clean energy, next-gen tech and online retail.
Before we get into it, here's the full list of non-leveraged ETFs that doubled in 2020.
Clean energy stocks took off in 2020 as the fossil fuel sector was breaking down. More than just a rotation within the sector, clean energy is getting a political boost as green energy initiatives, in some form or another, figure to be a priority in the new Biden administration. In total, 9 of the 23 funds on this list are focused on clean energy.
The online retail narrative is pretty obvious. As COVID-19 was shutting down many areas of the economy, many consumers shifted their buying activity online. The trend of growing online commerce, a theme which has been in place for years, simply accelerated and has likely only increased estimates for where this segment of the economy will be going forward.
Perhaps the biggest winner of 2020 is the ARK ETFs, which placed an extraordinary five different funds on this list. ARK is well-known for its focus on next generation tech and developing technologies. Leadership from the tech sector certainly played a role in its returns, but 100%+ gains from its genomics and industrial innovation ETFs proves its success lies in its research process.
Others worth noting:
- Cloud computing was another COVID theme that was a big winner. WCLD is the only cloud name on this list, but others, such as the First Trust Cloud Computing ETF (SKYY), also did very well.
- The IPO market, despite the global economic challenges in the background, was red hot. The Renaissance IPO ETF proved that more speculative investments tended to deliver huge returns.
- Kevin O'Leary's OGIG ETF benefited from the market's focus on large-cap growth resulted in a big year for this relatively newer fund.
You might assume that if there were 23 non-leveraged ETFs more than doubling in 2020, the leveraged ETF market must have done even better. Actually, that's not the case. The number of leveraged ETFs available for trading is much smaller and tends to focus only on broad market sectors. There are no leveraged products for clean energy & online retail and the ARK funds are all actively managed, so no leveraged products there either.
That leads the broader tech sector as the only area of the market to make this list.
All are internet or tech sector-based. TQQQ saw a lot of activity last year, especially on the Robinhood platform, where smaller retail investors threw caution to the wind but managed to earn some big returns. China, as a whole, posted more modest returns, but the China internet sector managed to ride the tech wave significantly higher.
The last group I'll touch on briefly is the ETN market. Exchange-traded notes aren't really that similar to the ETFs in structure except for the fact that they're both traded similarly. They tend to get lumped together though, so I think it's worth mentioning quickly.
Just like the leveraged ETFs, this list is short and belongs to just one issuer.
MicroSectors, which is part of RexShares, runs a series of leveraged and inverse ETNs targeting the FANG stocks, big oil, gold miners, big banks and MLPs. It probably doesn't need an explanation that the FANG stocks did very well in 2020. They clearly hit the sweet spot of the market with the highly leveraged products performing best.