3 Top Sectors of Q3 & Their Top ETFs

Sanghamitra Saha
·4-min read

The third quarter of 2020 can be marked by a sturdy stock market rally at the start and then the usual September slowdown. Fiscal and monetary stimulus, coronavirus vaccine hopes, pent-up consumer demand and decent earnings releases kept global markets steady in July and August (which was the best in 34 years).

But Wall Street is on its way for the first monthly decline in September since March.Doubts over a faster rollout of coronavirus vaccines, rising COVID-19 cases in the United States and Europe, reports of major banks engaging in transferring illicit funds, profit booking on tech stocks and pre-election volatility in the United States have spelt trouble for the markets.

Investors rotated into the beaten-down segments of the year — cyclicals. The S&P 500 and the Nasdaq witnessed back-to-back record-setting sessions at the end of August while the laggard Dow Jones turned positive for the year.

However, resurgence of coronavirus infections in the United States and Europe with new lockdown measures in some parts of the world spelt trouble for the markets recently. If this was not enough, Dr. Anthony Fauci, leading infectious disease expert, recently commented that a "large proportion" of the United States will not receive the vaccine in 2020, per a CNN report. So, safe-haven trade took charge at the end (read: "Worst September in 18 Years"? 4 Sector ETFs Surviving Selloffs).

Against this backdrop, below we highlight the winning sectors of Q3 and their best ETFs.

Clean Energy

Clean energy ETFs are among the top performers this year and the best performers in Q3. The cost of renewable energy generation has been going downhill in recent years.  The demand for solar panels is rising globally. Tesla shares’ monstrous rally has also aided the solar ETF. Apart from the United States, Europe and China have been focusing greatly on the clean energy area.

Big corporations are also making or promising investments in achieving the most-coveted carbon neutral status. If this was not enough, increasing chances of Democrats winning the U.S. presidential election is also benefiting the space as the candidate Biden has expansionary plans regarding clean energy.

Invesco Solar ETF (TAN) (up 59.7%),Invesco WilderHill Clean Energy ETF (PBW) (up 39%), SPDR Kensho Clean Power ETF CNRG (up 36.4%), First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) (up 36.5%)andiShares Global Clean Energy ETF (ICLN) (up 34.19%) were the winners (read: Here's Why Clean Energy ETFs Are Shining Bright).


The gaming industry has been booming this year buoyed by the pandemic as people are mostly stuck indoors. As a result, spending on video games in the United States has skyrocketed to new heights in the past few months.

To add more allure to gaming investing, DraftKings (DKNG) and Caesars (CZR) recently announced a multi-year deal with ESPN that will feature their content on the network's digital and TV platforms. Per the deal, DraftKings will be the exclusive provider of daily fantasy sports and a co-exclusive partner for gambling link-outs from ESPN, the company said, as quoted on CNBC.

Microsoft has also announced its plans to acquire video game behemoth Bethesda’s parent company — ZeniMax Media — one of the world’s most-important gaming firms, for $7.5 billion. All these have boosted Roundhill Sports Betting & iGaming ETF BETZ (up 40.1%) this quarter (read: 4 Reasons to be Bullish on Microsoft ETFs Now).


Overall, the tech sector has emerged a winner in the third quarter. ARK Innovation ETF (ARKK) (up 27.3%) and MicroSectors FANG+ ETN (FNGS) (26.7%) topped the list in the technology segment. Stocks that deal with Internet-related activities have had a spectacular run as it has less to do with human contact. The rapid emergence of cutting-edge technology, including cloud computing, big data, IoT, VR, AI, has been driving the sector. The growing adoption of 5G technology — the next wireless revolution — is opening up further opportunities.

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Invesco Solar ETF (TAN): ETF Research Reports
ARK Innovation ETF (ARKK): ETF Research Reports
SPDR SP Kensho Clean Power ETF (CNRG): ETF Research Reports
Roundhill Sports Betting iGaming ETF (BETZ): ETF Research Reports
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