One of the most popular categories of funds available to investors are those offering thematic exposure. This category leverages a specific theme or themes that have gained traction economically and within popular culture. Thematic ETFs range from the speculative (ARKX Space Exploration & Innovation ETF) to things we take for granted (Global X Infrastructure Development ETF). For this Thursday we reviewed the performance of popular thematic categories and offer sector related insights into drivers of performance. We look at a handful of the largest ETFs by AUM operating in each category.
Our performance charts compare funds to the S&P 500 index over the past 3-months. The goal is to highlight themes that holding up or rolling over as investors weigh their post-election optimism against re-emerging inflation concerns and rising interest rates in the near-term.
Our key takeaways on thematic ETFs are as follows:
- Speculative innovation themes like Space, AI & Robotics and the ARK fund family have held up well despite a broad pull back in US equities over the past weeks
- The best crypto related stocks are still going strong despite correction in the coin.
- Healthcare based themes are showing near-term strength in weak longer-term trends
- Utilities related themes like water and infrastructure continue to be the weakest performing themes
- Alt Energy is perking up coincidently with legacy Energy
Themes (A-Z)
Aging
- Corrective dynamics in the equity markets have flipped near-term performance within the “Aging” theme. MILN (Global X Millennial Consumer Fund) corrected in December and is attempting to put in a near-term low.
- Most of the “Aging” thematic offers exposure to traditional healthcare stocks and Biotech co.’s. These funds have firmed as investors have taken some profits in from leadership themes and added more conservative exposures
Alternative Energy
- Energy prices have firmed in the near-term and the Alt. Energy space has seen some improvement as well.
- Clean Energy is lagging through this potential upside reversal
- We would expect Solar and Uranium in particular to stay bid as long as Growth areas of the equity market remain under pressure
ARK Funds
- ARK Innovation and Fintech funds have been consolidating since early December and we’d expect their performance is path-dependent on the direction of equities from here.
- The ARK Robotics Fund persists in an outperformance trend while the ARK Genomic revolution fund has strengthened as rotation into laggard sectors like Healthcare have boosted shares in the near-term
- We have buy ratings on top holdings NVDA, AMZN, TSLA, META, PLTR, SHOP, COIN, TTD, RBLX, SQ and ACHR
Crypto
- Crypto as an asset class functions as a levered risk-on play.
- Unsurprisingly funds have retraced a significant portion of its gains over the past month. The Funds we look at are attempting to put in a bottom in the new year
- Longer-term Crypto fund charts (see BLOK 3yr price chart below) still look like longer-term bullish reversals
- CIFR, BTDR, MARA, CORZ are new upstarts to go along with “old heads” COIN, SQ and MSTR. With the exception of MARA, these stocks remain in strong outperformance trends
Cyber Security
- Cyber security stocks are consolidating amid near-term correction in the equity market
- Fixtures like AVGO, CRWD, FTNT and PANW remain notable buy rated stocks in our work
- MidCap names like CIEN and DOCU are also holding up well despite recent turbulence and look buyable here
- LDOS, GEN and FFIV are other buy rated names we like in Cyber
Infrastructure
- Infrastructure funds took a beating into early December ahead of the broad market corrective action.
- Not much of a bounce in the near-term despite these funds typically holding a mix of value and income generating securities. Our guess is ongoing weakness in commodities prices has been a drag.
- A mix of utilities, airport and highway operators, transports, MLP’s and energy storage and data centers and cellular service providers, infrastructure is typically a quality and income play which does best when equities are stable, but performance is subdued
- Our favorite ideas within these holding profiles are OKE, VST, TRGP and DTM
Internet
- Domestic Internet funds are consolidating performance but holding up better than many other Growth areas of the US equity market. Underperformance has primarily hit Consumer Discretionary stocks
- Chinese shares can’t seem to get out of their own way and that has continued into 2025 with a big spike in performance around government interventions in September/October showing no upside follow-through
- We like TTD, SQ, DDOG, MELI, SHOP, NET, HOOD, PSTG, ROKU
Robotics & AI
- Performance of Robotics and AI ETF’s is all over the map this year
- The best performing funds are anchored by core holdings AAPL, MSFT, NVDA, GOOGL, META, ORCL, BAC and CRM (all remain buy rated in our work with the exception of MSFT)
- Lagging funds like ROBO are typically holding a broader mix of international equities with higher sector exposure in Healthcare and Industrial stocks rather than Technology stocks
Space
- Space focused funds have a broad mix of satellite, Aero/Defense, and Small/Mid Software and industrial co.’s
- AMZN is also in the space business
- RKLB, COHR, FTI, LDOS and Elbit Systems are names that we recommend
- Space themed funds holding smaller innovation-based companies are significantly outperforming the legacy Aerospace & Defense ETF
Water
- Water funds have gone in the tank over the past 3-months
- Most of the largest holdings in the First Trust Water ETF have been correcting in 2024. The best stock charts are found in the small/mid space
- We like domestic names like PNR, ACM, PRMB, MLI and BMI
Data sourced from FactSet Research Systems Inc.
