To The Moon

What ETF sectors are worth investing in under 2022 Financial Markets？

Summary

• Best-Performing ETFs Of 2021
• Movies & Entertainment
• Aerospace & Defense
• Online retail
• Oil-and-gas exploration and production

The Fed starts tapering in October 2021, which means a gradual normalization of monetary policy, followed by a normalization of interest rate hikes and balance sheet runoff.

Omicron, the shift in the Fed's monetary policy, supply chain crisis, and inflation are factors that are destined to make 2021 and 2022 the most turbulent periods for capital, finance, and assets in recent decades.

With the influence of specific risks, there are often specific investment opportunities.

More than $100 billion flowed into equity sector ETFs in 2021, up from $70 billion in 2020, according to data from Morningstar Inc. There are now 494 such funds with a combined $806 billion in assets, up from 370 equity sector ETFs with combined assets of $346 billion in 2016. Natural gas and energy ETFs dominated the list of best-performing ETFs for the year, with carbon credit strategies, rare metals, coffee futures and freight futures also making an appearance.

So which sectors are most likely to benefit from the confluence of factors shaking up the economy?

1. Movies&Entertainment

This industry has one of the highest growth expectations for 2022, with analysts expecting per-share earnings to rise 57.5% from last year, according to S&P Global data as of Dec. 31. The industry hit a low point in the U.S. in 2020 with the closing of movie theaters amid the pandemic and lockdowns. But box-office revenue is poised to recover, according to PricewaterhouseCoopers, which is predicting a 37.3% compound annual growth rate for revenue through 2025.“

The combination of the reopening of movie theaters and demand for streaming entertainment is fueling a resurgence,” says Mr. Stovall. Among funds in this sector is Communication Services Select Sector SPDR (XLC), which has about $14 billion in assets and top holdings in companies such as Facebook parent Meta Platforms Inc., Google parent Alphabet Inc., AT&T Inc., Netflix Inc. and Walt Disney Co. The fund, which returned 16% in 2021, has an expense ratio of 0.12%.

Downside risk: Earnings growth could stall if the Omicron variant of Covid-19 continues to flare up in the U.S., delaying consumers’ willingness to go to movie theaters. A slowdown in subscribers for streaming content also would hurt providers. The churn rate for subscribers of video-on-demand services in 2022 is predicted to be 30% world-wide, according to Deloitte.

2. Aerospace& Defense

Last month, President Biden signed the National Defense Authorization Act into law, authorizing a 5% increase in military spending to $768 billion. And while the latest Omicron variant will challenge travel in the short term, Deloitte says it believes that both domestic and international travel will continue to recover over the course of 2022. That will boost demand for commercial aircraft.

Funds focused on this sector include iShares U.S. Aerospace & Defense (ITA), which has about $2.5 billion in net assets and top holdings in Raytheon Technologies Corp. , Boeing, Lockheed Martin Corp. , Northrop Grumman Corp. and General Dynamics Corp. It returned 9.4% in 2021 and has an expense ratio of 0.42%.

Downside risk: The No. 1 concern is that the Omicron surge could trigger lockdowns and slow air traffic recovery. Continued supply-chain bottlenecks and semiconductor and electronic shortages could also hurt manufacturers and the aftermarket. The labor shortage is another risk factor.

3. Online retail

Last year, the threat of higher interest rates caused investors to lock in profits in areas such as consumer discretionary and technology, says CFRAs Mr. Stovall. But EPS growth for 2022, combined with still relatively low interest rates, should reignite interest in sectors with strong growth prospects, he says.

ProShares Online Retail (ONLN) has about $620 million in net assets. Its top holdings are in Amazon.com, Alibaba Group Holding, eBay and DoorDash. The fund, which was down 25% in 2021, has an expense ratio of 0.58%.

Downside risk: Amazon is the 800-pound gorilla in online retail. Antitrust bills have been introduced in Congress targeting Amazon and Big Tech for their market dominance. If any pass this year, this industry titan could stumble, and that could hurt online retail stocks, equity analysts say.

4. Oil-and-gas exploration& production

Surging domestic and global demand above pre-pandemic levels should benefit the industry, analysts say. Hurricane Ida damaged U.S. offshore oil-and-gas production and companies are now rushing to put facilities back online as natural gas and oil prices soar. In November, President Biden tapped the nation’s strategic oil reserves to alleviate supply concerns.

Among ETFs, iShares U.S. Oil & Gas Exploration & Production (IEO) has more than $320 million in net assets and tracks the Dow Jones U.S. Select Oil Exploration and Production Index. Its top holdings include Conoco Phillips, EOG Resources and Pioneer. The ETF surged 76% last year. It has an expense ratio of 0.42%.

Downside risk: Another Covid-related relapse could slow the economy, reducing energy demand. OPEC could also lose its supply discipline and start producing too many barrels a day above its production targets, weakening oil prices.

ARTICLE SOURCE：etf.com,www.wsj.com

Here are the Questions:

Which ETF do you own now？

Which sector do you think will fly in 2022？

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