July has been kind to the U.S. stock market even amid escalating trade tensions and rounds of tech sell-off. Dow Jones recorded the largest monthly gain of 4.7% since January while the S&P 500 and the Nasdaq Composite Index logged in the fourth consecutive monthly gains of 3.6% and 2.2%, respectively.
A string of earnings and revenue beats drove the markets higher. Additionally, accelerating economic growth and reports of renewed trade negotiations between the United States and China added to further strength.
That said, a few sectors easily crushed the market in July. Below we have highlighted sector ETFs that witnessed handsome gains last month and could be better plays in the months ahead should the trends prevail.
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Airline stocks were on tear last month buoyed by strong earnings, a busy summer travel season, and moves to trim capacity growth and cut non-fuel costs. As such, the U.S. Global Jets ETF (NYSEARCA:JETS) emerged as the biggest winner in July, gaining 8.1%. The fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index.
In total, the product holds 34 securities that are heavily concentrated on the top four firms with double-digit allocation each. Other firms hold no more than 4.6% share.
The fund has gathered $98.1 million in its asset base while sees lower trading volume of nearly 29,000 shares a day. It charges investors 60 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Master limited partnerships (MLP) or MLPs rallied on robust drilling activity, strong earnings, and the new FERC (Federal Energy Regulatory Commission’s) ruling related to the treatment of income taxes for interstate natural gas pipeline operators that has offered them some relaxation.
While most of the MLP ETFs surged, the Alerian MLP ETF AMLP (NYSEARCA:AMLP) climbed 8.1%. This fund tracks the Alerian MLP Infrastructure Index, holding 28 stocks in its basket with heavy concentration on the top six firms.
AMLP is the most popular and most liquid ETF in the MLP space, with AUM of $10.1 billion and average daily volume of 15.9 million shares. It charges 85 bps in fees per year from investors.
A wave of mergers and acquisitions and encouraging trends including faster drug approvals, new products and Trump’s tax reform fueled growth in the pharma industry. The SPDR S&P Pharmaceuticals ETF (NYSEARCA:XPH) provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index.
The product holds 44 securities, with none making up for more than 5% share each. With AUM of $351.4 million, it trades in good volume of around 74,000 shares a day and charges 35 bps in fees a year.
The product was up 7.8% last month and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Though the sector has been hit hard by tariff and trade disputes, it regained momentum in July thanks to strong earnings and abating fears of a trade war. As such, the Invesco S&P 500 Equal Weight Industrials ETF (NYSEARCA:RGI), which offers equal-weight exposure to the stocks in the industrials sector of the S&P 500 Index, has gained 7.6%.
The ETF follows the S&P 500 Equal Weight Industrials Index, holding 70 stocks. Machinery and aerospace & defense account for double-digit exposure each, while commercial services & supplies, airlines and road & rail round off the next spots with single-digit allocations.
The product has accumulated $271.4 million in its asset base, while volume is light at around 22,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank of 2 (Buy) with a Medium risk outlook.
Aerospace & defense stocks ride higher on increased NATO defense spending, robust demand for passenger jets as well as earnings optimism. The SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR) offers equal-weight exposure to 35 stocks by tracking the S&P Aerospace & Defense Select Industry Index.
It has been able to manage $1.3 billion in its asset base, while trades in average daily volume of around 129,000 shares. It charges 35 bps in annual fees and has gained 7.6% last month.
The fund has a Zacks ETF Rank #2 with a Medium risk outlook.
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