For anyone that has been asleep the last few weeks, bullish momentum has without a doubt been the dominant force on Wall Street since the start of 2012. Encouraging economic data releases on the home front have helped to bolster equity markets higher thanks to improving growth expectations. With the bull-train firing strong on all cylinders, many are wondering which corners of the market are still attractive and which ones could be due for a correction.
Identifying the strongest performers leading the rally on Wall Street can have a two-fold benefit; first and foremost, investors can get a "big picture" overview of which asset classes are attracting interest in the current environment. This simple, but useful observation, can help to shed light on gauging the overall market sentiment. Second, some may treat the list of best performers as a "buy" list, in anticipation that positive momentum will continue to favor current winners so to speak. On the flip side, others could use this as an opportunity to identify which asset classes are potentially overbought, and may be due for a pullback.
Regardless of how investors choose to interpret performance data, it's important to remember the golden rule of Wall Street: past performance is not a guarantee of future returns.
Below we highlight the four best performing sector-specific ETFs from a year-to-date perspective (as of 4/3/2012):
4. Industrials GEMS ETF (NYSEARCA:IGEM): Up 25%
With optimism spreading to virtually every corner around the globe, its not too surprising to see that investors are favoring emerging markets. This ETF, which consists of the 30 largest emerging market companies from the industrials sector, has staged an impressive rally so far this year as growth prospects overseas have improved. It's quite surprising how little of inflows this ETF has attracted despite its stellar performance; IGEM has just under $2 million in assets under management since launching in mid-2011.
3. Brazil Consumer ETF (NYSEARCA:BRAQ): Up 26%
Brazil's economy is heating up again; its ever-expanding middle class continues to be a major driver of growth for both local and multinationl firms with operations in this Latin American giant. BRAQ's performance is truly impressive considering its underlying portfolio; this ETF is dominated by companies from traditionally "safe" sectors, including food & beverage and personal & household goods.
2. Financials Sector Fund (NYSEARCA:RWW): Up 27%
This is the only U.S. sector-specific ETF to make the list. Financials stocks have appreciated greatly as investors have taken measures to increase their risk appetite amidst the improving economic landscape. RWW separates itself from other offerings in the Financials Equities ETFdb Category by employing a unique weighting methodology; instead of making allocations based on market capitalization, this ETF weights each security based on top line revenue. By comparison, the cap-weighted Financials Select Sector SPDR (NYSEARCA:XLF) has only gained 21% year-to-date, trailing behind RWW by a meaningful margin.
1. India Infrastructure ETF (NYSEARCA:INXX): Up 31%
This India infrastructure ETF comes in at the top of the list, posting robust gains of over 30% in just the first few months of the year. Ongoing investment in infrastructure overseas are bolstering this ETF higher as the component companies reap the benefits of taking on new construction projects. From an industry breakdown perspective, this ETF features the biggest allocations to electricity companies followed by construction stocks.
Disclosure: No positions at time of writing.
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