The bull market for U.S. stocks celebrates its sixth anniversary today and it has been quite a ride not only for U.S. equities, but some of the exchange traded funds that hold those stocks as well.
The U.S. exchange traded products industry hit a major milestone last year, eclipsing $2 trillion in assets under management. While it took nearly two decades for the ETF industry to reach $2 trillion in assets, it will not need nearly as long to get to $5 trillion, according to a new report by PwC. The PwC report says the global ETF industry will reach $5 trillion in combined AUM by 2020. [ETFs: No Stopping at $2 Trillion]
When the current bull market began in March 2009, there 588 non-leveraged ETFs on the market, nearly a third of which have topped the S&P 500 over that period. Of the top 10 non-leveraged ETFs since the bull market commenced, seven are sector funds. As of Dec. 26, 2014, there was $311.1 billion allocated to sector ETFs with energy ETFs accounting for $44.7 billion of that total, according to Bloomberg.
Perhaps not surprisingly, consumer discretionary and healthcare ETFs dominate the list of the 10 best non-leveraged ETFs since March 2009. Seven of those 10 funds are either consumer discretionary or healthcare ETFs, led by the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT). A $10,000 investment in FBT, now the second-largest biotech ETF by assets, would have been worth nearly $73,000 as of March 5, according to Morningstar data. [A Fine ETF for Biotech M&A]
Of the broad market equity ETFs on that top 10 list, all three hail from the Guggenheim ETF suite, led by the Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV). RPV targets the cheapest third of the S&P 500 Index and weights its holdings by the strength of their value characteristics,” according to Morningstar analyst Alex Bryan.
RPV is followed by the Guggenheim S&P Smallcap 600 Pure Value ETF (NYSEArca: RZV), which was one of the top-performing broad market equity ETFs in 2012 and 2013. A $10,000 investment in RZV in March 2009 has grown to over $67,000. The Guggenheim S&P MidCap 400 Pure Value ETF (NYSEArca: RFV) is also on the list.
Guggenheim has four ETFs on the top 10 since March 2009 list, double the amount of any other issuer. Of the top 50 non-leveraged ETFs since the start of the bull market six years ago, 10 are Guggenheim funds, including all six of the firm’s pure style ETFs.
Three of the firm’s equal-weight ETFs, including the Guggenheim S&P Equal Weight Consumer Discretionary ETF (NYSEArca: RCD) and the Guggenheim S&P Equal Weight Financial ETF (NYSEArca: RYF), are on the top 50 list as well. Having grown $10,000 into $61,600 since March 2009, RCD is the third-best non-leveraged sector ETF over that period.
While equal-weight ETFs have been more than legitimized over the years, some critics allege that the advantages of these products are solely tied to deeper exposure to small-caps and/or value stocks. However, Efficient rebalancing of equal-weight ETFs, either sector or broad market funds, not only drives returns, but also helps these ETFs steer clear of concentration risk. [How to Evaluate ETFs]
While the current bull market is older than its average predecessor, there are indications that more upside is in store for equities. Help could come from rising interest rates, a scenario that is often kind to the consumer discretionary, industrial and other cyclical sectors.
“The period before the Federal Reserve raises rates is historically a great time to invest. Over the past six tightening periods since 1980, the S&P 500 has returned 23.5 percent on average in the nine months prior to the first rate increase. Assuming the next tightening cycle begins at the Fed’s meeting in September, the nine-month period this time around began in mid-December. Since that time, the S&P 500 is already up more than 7 percent. Currently, a number of indicators, including my favorite, the New York Stock Exchange Cumulative Advance/Decline Line, show that the stock market is improving and can sustain its upward momentum,” said Guggenheim Global Investments Chief Investment Officer Scott Minerd in a note.
Guggenheim S&P 500 Pure Value ETF
