When looking at top ETF picks for the second half of the year, it’s clear that thematic ETFs have been on the rise. ETF Trends’ CIO and Director of Research, Dave Nadig, spoke with TD Ameritrade’s Nicole Petallides about how things have changed in the past four months, and traditional sector plays are just not going to cut it.
As Nadig explains, investors shouldn’t want to be in healthcare; they should want to be in vaccines and therapeutics. They don’t want to be in consumer stocks; they’d rather be in online retailers and facilitators. And they certainly don’t want to be in tech; they want to be in software.
That’s part of the reason there’s been so much interest in thematic ETFs. A thematic ETF is one that pools stocks together not based on their GICS sector code, but their exposure to broad economic tradewinds. It’s a tricky group given how it comes down to preference per investor. However, there are some great examples of funds that have caught investor attention.
Nadig points out the Global X JETS ETF (JETS), as it is probably the most notable example. It’s grown from almost nothing to $1.1 billion in just a few months, as investors tried to call the bottom in airlines, airport manufacturers, and support businesses. Cannabis, green energy, video gaming — they’re all thematics that have seen real growth.
“Forget about your traditional sector rotation strategy and focus on how the fundamentals of the economy are shifting. Otherwise, stick to the broad markets,” says Nadig.
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