After a stupendous rally, Wall Street is lately witnessing bouts of volatility on fears of a second wave of coronavirus infections. This is especially true as the United States reported more than 30,000 additional coronavirus cases on Friday and Saturday, the highest daily totals since May 1, according to data compiled by Johns Hopkins University.
New cases are rising in states across the South, West and Midwest. California reported a record 4,515 new cases in a 24-hour period on Sunday — the highest so far in one day for the state during the pandemic. Cases in Florida rose by a single-day record of 4,049 based on Saturday’s tally, and cases on Sunday increased another 3,494. States including Arizona, Nevada, Missouri, South Carolina, Montana and Utah also saw cases rise by one-day records over the weekend. The increase in new cases has sparked a broad-based resurgence in the pandemic that threatens to stunt the nation’s reopening process (read: Bet on Value ETFs to Tap an Uneven Market).
However, a flurry of economic data indicates that the downturn may have bottomed in April. U.S. retail sales jumped 17.7% in May as states gradually reopened their economies and consumers spent more. Also, industrial production rose 1.4% with the resumption of operations. The United States added 2.5 million jobs in May — the largest monthly gain since the Bureau of Labor Statistics started tracking the data series in 1939. Additionally, in June, homebuilder confidence posted a record jump while consumer sentiment climbed the most since 2016. Additionally, manufacturing sector activity returned to expansion in June for the first time since February.
Coupled with upbeat data, news of more stimulus from the Federal Reserve and hopes of the Trump administration’s $1 trillion infrastructure spending package helped to lift investors’ sentiment.
Investors should note that the technology sector has emerged as a winner in 100 days since the World Health Organization declared COVID-19 a pandemic. It has shown resilience in one of the worst economic environments that the United States has ever seen.
What is Technology Gaining From?
The epidemic has driven the e-commerce boom and changed the consumer landscape to a purely digital one. People may choose to stay indoors again during the second wave of the disease, which in turn would boost demand for cloud computing, gaming, e-sports and streaming services. Additionally, investors will continue to pile up software shares which are apparently more insulated from the impacts of the virus.
That said, we have highlighted some ETFs that have been outperforming since the pandemic and will continue to do so given renewed fears of infections. These funds have a strong Zacks Rank #1(Strong Buy) or 2 (Buy).
WisdomTree Cloud Computing Fund WCLD – Up 51.2%
This fund offers exposure to emerging, fast-growing U.S.-listed companies (including ADRs) primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 52 stocks in its basket and charges investors 45 bps in fees per year. The product has amassed $331.9 million in its asset base and trades in average daily volume of 151,000 shares. It has a Zacks ETF Rank #2 (read: 5 ETFs That Outshined During 100 Days of Coronavirus Pandemic).
SPDR S&P Internet ETF XWEB – Up 42.1%
This product follows the S&P Internet Select Industry Index, holding 42 stocks in its basket. It charges 35 bps in annual fees and trades in volume of 5,000 shares. With AUM of $28 million, the fund carries a Zacks ETF Rank #2.
Invesco NASDAQ Internet ETF PNQI – Up 29.9%
This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 90 stocks in its basket, it has AUM of $705 million and trades in lower volume of about 31,000 shares a day. It charges 62 bps in fees per year and carries a Zacks ETF Rank #2.
First Trust Cloud Computing ETF SKYY – Up 29.3%
This fund provides exposure to cloud-computing securities by tracking the ISE Cloud Computing Index. Holding about 65 stocks in the basket, the product has been able to manage $4.2 billion in its asset base while seeing a good volume of about 555,000 shares a day. It has 0.60% in expense ratio and a Zacks ETF Rank #2 (read: Fearing 2nd Wave of Coronavirus? Bet on Stay-at-Home ETFs).
iShares Expanded Tech-Software Sector ETF IGV – Up 25.3%
This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Expanded Technology Software Index. Holding a basket of 102 securities, the fund charges 46 bps in annual fees and has AUM of $4.7 billion. Volume is good as it exchanges nearly 898,000 shares a day. IGV has a Zacks ETF Rank #1.
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