Top-Performing Technological ETFs Amid Coronavirus Crisis

The technological sector has kept its promise of strong returns so far this year, combatting the economic slowdown induced by the coronavirus pandemic. The S&P 500 Information Technology Sector Index has gained around 18% so far in 2020 as against the broader S&P 500 index’s loss of 2.4%. Going on, it is being widely believed that the major technology companies’ resilience to the coronavirus crisis have been supporting the Nasdaq Composite index. Major technology stocks like Facebook (FB), Microsoft (MSFT), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL) are all positive in 2020 so far. Moreover, Amazon (AMZN) has supported the Nasdaq by gaining more than 45% in the year.

On major support from Amazon and Microsoft, the tech-heavy Nasdaq Composite index gained 0.5% on Jul 9 in spite of its major market peers declining by more than 0.5%, largely due to rising coronavirus cases.

The second half of 2020 is expected to keep facing the brunt of the pandemic as the second wave of the outbreak is gathering steam. In fact, United States saw the highest number at 60,646 new coronavirus cases reported on a single day on Jul 9, per the CNN report. In the current scenario, the rising work-from-home and online shopping trend, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With the new trends making way, these major technology companies are expected to continue to gain on rising demand for their products and services.

Evidently, cloud computing has emerged as a key technology in the fight against coronavirus. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working. The work-from-home model has bumped up sales of PCs, laptops and other kind of computer peripherals.

Further, the semiconductor industry received a boost from the coronavirus crisis on solid demand for memory chips and other semiconductor products. Notably, stay-at-home and physical-distancing mandates are spurring demand for data center and gaming.

More and more people are spending time at home, in line with social-distancing guidelines due to the pandemic woes. As a result, they are resorting to streaming platforms like Netflix, Amazon Prime or Disney+ or turning to social media platforms like Facebook and Twitter for in-house entertainment.

It is also observed that the coronavirus-induced lockdown boosted demand for video games. Per the NPD Group report, the U.S. video game industry witnessed record sales across hardware, software, accessories and game cards, totaling $977 million (up 52% year over year) in May (highest since May 2008) after gaining around 73% year over year in April.

Strikingly, even as the rebooting of the U.S. economy happens in phases and social-distancing restrictions are being eased, people are increasingly opting for contactless operations. It’s largely because the pandemic brought about some changes in lifestyle and influenced Americans’ preferences. Most of the surveys have found that people are more interested in online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies now.

Taking a look back, the first-quarter 2020 numbers show shoppers’ inclination t
oward online shopping. According to U.S. Department of Commerce data, consumers made around $146.47-billion online purchases with U.S. retailers, rising 14.5% year over year (per a Digital Commerce 360 article). Going by the same article, online purchases accounted for around 16.2% of total retail sales for the quarter, increasing 15.0% year over year.

Technology ETFs Up More Than 25% YTD

Against this backdrop, let’s take a look at the technology ETFs that have gained more than 25% year to date, defying the coronavirus-led hurdles in 2020:

Global X Cloud Computing ETF CLOU — up 46.6% year to date

The fund seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware. It has an expense ratio of 68 basis points (bps) (read: ETFs to Ride the Wave of 3 Key Coronavirus-Led Trends in 2H20).

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