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The third-quarter was an average-to-downbeat period for investors, mainly due to rising rates. A cooling U.S. economy, falling consumer confidence, a series of bank downgrades also made matters worse for Wall Street. However, all were not downbeat for the broader market as there were ebbing U.S. recession fears along with several upbeat economic data points and a decent Q2 earnings season.
The S&P 500 (down 0.7%), the Nasdaq (down 2.1%) and the Russell 2000 (down 2.5%) have slumped in the third quarter while the Dow Jones (up 0.7%) gained (as of Sep 22, 2023). Against this backdrop, let’s discuss the ETF areas that emerged winners in the third quarter and those that were hit hard.
In a significant development, the Department of Health and Human Services (HHS) has recently initiated a review of marijuana's classification under the Controlled Substances Act. This move has the potential to impact the burgeoning marijuana industry favorably, which has faced federal restrictions despite state-level legalization efforts (read: Behind the Recent Surge in Marijuana ETFs).
Growing energy concerns and the increasing need for dependable and eco-friendly energy sources are also fueling the surge in uranium ETF. The ability of nuclear power to cut carbon emissions has brought it back in the public eye.
Oil Services – Invesco Oil & Gas Services ETF (PXJ - Free Report) ) – Up 18.3%
The wind is at the back of the Oil and Gas-Field Services Industry as it is poised for growth in the coming year, driven by favorable crude pricing and robust demand for oilfield services. The industry comprises companies that play a pivotal role in supporting exploration and production activities (read: Time for Oilfield Services ETFs?).
Shipping – SonicShares Global Shipping ETF (BOAT - Free Report) ) – Up 11.4%
Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. This, in turn, has proved to be tailwind for the shipping ETFs (read: Time for Shipping ETFs Amid Improving Global Trade Scenario?)
Flop Industries
Solar Power – Global X Solar ETF (RAYS - Free Report) ) – Down 25.2%
There has been soft U.S. demand for solar equipment. The demand is more lukewarm in states like Texas and Arizona where cheaper electricity prices make the economics of residential solar less attractive. high borrowing costs are also hurting solar companies’ businesses.
Defense – Global X Defense Tech ETF (SHLD - Free Report) ) – Down 23.2%
The aerospace and defense stocks recorded a dip in performance in the third quarter. Like most businesses, higher interest rates can be held responsible for this slump. The underlying Global X Defense Tech Index seeks to provide exposure to defense technology companies that are positioned to benefit from technology, services, systems and hardware that cater to the defense and military sector.
Lithium carbonate prices have slumped recently, due to the decline in demand for electric vehicles. Battery manufacturers for electric vehicles have gradually reduced their input purchases since the beginning of the third quarter due to their inventories reaching capacity and the depletion of funds from prior government-led incentives, per tradingeconomics.
Image: Bigstock
Top and Flop Industry ETFs of Q3
The third-quarter was an average-to-downbeat period for investors, mainly due to rising rates. A cooling U.S. economy, falling consumer confidence, a series of bank downgrades also made matters worse for Wall Street. However, all were not downbeat for the broader market as there were ebbing U.S. recession fears along with several upbeat economic data points and a decent Q2 earnings season.
The S&P 500 (down 0.7%), the Nasdaq (down 2.1%) and the Russell 2000 (down 2.5%) have slumped in the third quarter while the Dow Jones (up 0.7%) gained (as of Sep 22, 2023). Against this backdrop, let’s discuss the ETF areas that emerged winners in the third quarter and those that were hit hard.
Top Industries
Cannabis – Roundhill Cannabis ETF (WEED - Free Report) ) – Up 37.3%
In a significant development, the Department of Health and Human Services (HHS) has recently initiated a review of marijuana's classification under the Controlled Substances Act. This move has the potential to impact the burgeoning marijuana industry favorably, which has faced federal restrictions despite state-level legalization efforts (read: Behind the Recent Surge in Marijuana ETFs).
Uranium Miners – Sprott Junior Uranium Miners ETF (URNJ) – Up 35%
Growing energy concerns and the increasing need for dependable and eco-friendly energy sources are also fueling the surge in uranium ETF. The ability of nuclear power to cut carbon emissions has brought it back in the public eye.
Oil Services – Invesco Oil & Gas Services ETF (PXJ - Free Report) ) – Up 18.3%
The wind is at the back of the Oil and Gas-Field Services Industry as it is poised for growth in the coming year, driven by favorable crude pricing and robust demand for oilfield services. The industry comprises companies that play a pivotal role in supporting exploration and production activities (read: Time for Oilfield Services ETFs?).
Shipping – SonicShares Global Shipping ETF (BOAT - Free Report) ) – Up 11.4%
Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. This, in turn, has proved to be tailwind for the shipping ETFs (read: Time for Shipping ETFs Amid Improving Global Trade Scenario?)
Flop Industries
Solar Power – Global X Solar ETF (RAYS - Free Report) ) – Down 25.2%
There has been soft U.S. demand for solar equipment. The demand is more lukewarm in states like Texas and Arizona where cheaper electricity prices make the economics of residential solar less attractive. high borrowing costs are also hurting solar companies’ businesses.
Defense – Global X Defense Tech ETF (SHLD - Free Report) ) – Down 23.2%
The aerospace and defense stocks recorded a dip in performance in the third quarter. Like most businesses, higher interest rates can be held responsible for this slump. The underlying Global X Defense Tech Index seeks to provide exposure to defense technology companies that are positioned to benefit from technology, services, systems and hardware that cater to the defense and military sector.
Lithium Miners – Sprott Lithium Miners ETF (LITP - Free Report) ) – Down 22.5%
Lithium carbonate prices have slumped recently, due to the decline in demand for electric vehicles. Battery manufacturers for electric vehicles have gradually reduced their input purchases since the beginning of the third quarter due to their inventories reaching capacity and the depletion of funds from prior government-led incentives, per tradingeconomics.
Biotech – Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) ) – Down 20.8%
Biotech stocks have been on a roller-coaster ride. Rising rate worries weighed on the segment heavily as the segment hails from the high-growth one.