If you focused entirely on the U.S. equity markets in the 3rd quarter, you missed out on some of the biggest returns coming from international stocks. If you paid attention to the major headlines coming out of Asia, the Chinese crackdown on internet companies dominated the narrative, but there were gains to be had if you looked outside of the tech space. Cyclicals were volatile but actually produced some strong returns when you look at the quarter as a whole. Interestingly, it was also the utilities sector that got a lot of attention as some investors no doubt shifted to defense amid the volatility.

Other emerging nations, especially India, did well. Russia has done well on the oil trade even though the dollar gained as a whole throughout the quarter. I think it's important to separate China from the rest of emerging markets here. Broad emerging markets indices, which generally include a 30%-ish weighting to China, were down around 9% for the quarter, the emerging markets ex-China index was down only 3%. Emerging markets actually aren't looking too bad here if financials and energy continue to do well, but I think you have to really be picky and choosy.

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U.S. equities are almost entirely absent from this month's list, but the commodities space did very well. Oil, natural gas and, by extension, energy stock ETFs are all over this list. The uranium rally was a big story over the past few months and we see multiple uranium/rare earth metals products generating big returns. I'm kind of a believer in the reflation trade narrative here. Inflation, I expect, will be a problem for a while, probably longer than the majority expect. The Fed will probably move quickly on tapering to try to keep inflation under control and that puts further upward pressure on interest rates. That could prove to be helpful to cyclicals with energy adding support.

Here's the list of the top performing ETFs for the 3rd quarter of 2021.

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The top two spots on the list belong to natural gas - the United States Natural Gas Fund (UNG) and the United States 12 Month Natural Gas Fund (UNL). These two funds really only differ in how they construct their futures contract exposure. Natural gas has gone from around $3.60 per contract at the end of June to nearly $6 at the end of the 3rd quarter. Thank a global supply crunch along with expectations for a cold winter for driving up the price of most fuel-based commodities.

Staying on the commodities side, the North Shore Global Uranium Mining ETF (URNM) and he Global X Uranium ETF (URA) both delivered 10%+ returns with URNM nearly doubling the performance of URA. The high demand for oil and natural gas is likely pulling the price of uranium up with it, but there is a genuine increase in demand here as an alternative energy product. Questions of a supply/demand imbalance could cause prices to fall rather quickly, but that could take some time to play out. The VanEck Rare Earth & Strategic Metals ETF (REMX) is also getting some run.

A total of 9 different India-focused funds crack the 3rd quarter's top performer list. The largest by far is the iShares MSCI India ETF (INDA). It accounts for more than 70% of all India ETF assets and was up 10% in Q3. After dealing with a severe COVID outbreak earlier this year, the country has gotten it under control and is seeing a strong economic recovery. India's inflation rate of 5.3% is still elevated, but it's one of the few countries that has been seeing inflation fall, not rise. That's given the Reserve Bank of India greater flexibility and drawn investors into the country. The Invesco India ETF (PIN) was narrowly the best performer in the group, but the WisdomTree India Earnings ETF (EPI), the iShares India 50 ETF (INDY) and the Franklin FTSE India ETF (FLIN), easily the cheapest in the group, also did well.

Other ETFs worth noting:

The Alger Mid Cap 40 ETF (FRTY) is the only U.S. stock fund to make the list. It uses an actively-managed approach to identify 40 names through the company's proprietary research process. Since its inception just earlier this year, FRTY has gained roughly 8% putting it on pace with the Dow Jones U.S. Mid-Cap Growth index.

Other non-China emerging markets ETFs that made the list include the Franklin FTSE Russia ETF (FLRU), the iShares MSCI Russia ETF (ERUS), the Global X MSCI Argentina ETF (ARGT), the iShares MSCI Argentina & Global Exposure ETF (AGT) and the iShares MSCI Kuwait ETF (KWT). Russia and Kuwait, as mentioned above, have benefited from the oil trade, while in Argentina, an improving economy and slowing pandemic outbreak have been tailwinds, but geopolitical events may be the bigger driver. Voters overwhelmingly rebuked the current government in elections in September and could be looking at a major political and economic overhaul come the November mid-terms.

The next-gen tech space is also well-represented with the Global X Lithium & Battery Tech ETF (LIT), the Viridi Cleaner Energy Crypto Mining & Semiconductor ETF (RIGZ) and the KraneShares Global Carbon ETF (KRBN) cracking the top 30. RIGZ is a pretty new ETF that I've profiled before and looks interesting on its premise of combining the crypto and clean energy spaces. KRBN is your more traditional clean energy ETF and is a little surprising to find on the list given the attention that the fossil fuel space received during the quarter.

And how can we ignore the Breakwave Dry Bulk Shipping ETF (BDRY)? It seems to show up on either the top performer or bottom performer list every month, although 2021 has been mostly positive for the fund. The current global supply chain and shipping issues are well-documented and there's no clear timeline as to when they might correct themselves (expect it to last well into 2022 I'd imagine).

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