Interest in Thematic ETFs Rises as Inflation Fears Dissipate | ETF Trends

Despite inflation fears turning into recession fears and bringing down the markets as of late, the summer rally did see a rise in interest in thematic exchange traded funds (ETFs).

“Beaten-up meme and thematic stock exchange traded funds have made dramatic gains in recent weeks, buoyed by signs of a possible peak in inflation and legislation paving the way for a boom in clean energy,” noted a Barron’s report on August 14.

Of course, a couple of weeks later, that gave way to the U.S. Federal Reserve foreseeing more rate hikes and thus bringing down the summer rally in equities. Nonetheless, it’s notable that investors’ confidence returned and demand for thematic ETFs saw a rise during the summer rally.

One of the trends was funds focused on renewable energy seeing a profound spike. The recently signed Inflation Reduction Act certainly helped renewable energy funds with their government subsidies, but a general rise in the stock market also helped to push these funds higher.

“These funds tend to be high beta, so it shouldn’t be too surprising that as the US equity market has ticked up again, that these funds too have recovered some ground over recent weeks,” said Kenneth Lamont, senior fund analyst for passive strategies at Morningstar.

Get Broad, Renewable Energy Exposure in 1 ETF

Running with these themes, exchange traded funds (ETFs) have a plethora of options to play renewable energy. While investors can opt for funds that focus on specific sources, such as wind or solar, they can also get broad exposure in one fund: the Global X Renewable Energy Producers ETF (RNRG).

RNRG seeks to track the price and yield performance of the Indxx YieldCo & Renewable Energy Income Index. The underlying index is designed to provide exposure to publicly traded companies that produce energy from renewable sources, including wind, solar, hydroelectric, geothermal, and biofuels (including publicly traded companies that are formed to own operating assets that produce defined cash flows).

Overall, RNRG gives investors:

  • High growth potential: RNRG enables investors to access high growth potential through companies at the leading edge of a structural shift in global energy production.
  • Renewables exposure: The ETF is a targeted, thematic play on renewable energy producers.
  • A conscious approach: RNRG incorporates the environmental, social, and governance (ESG) proxy voting guidelines from Glass Lewis.

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