IBIT, ETHA Lead Best-Performing ETFs of November

Crypto ETFs were among the top-performing funds in November, driven by optimism that a Trump presidency would bring looser regulations for digital assets. The iShares Bitcoin Trust ETF (IBIT) climbed 38% while the iShares Ethereum Trust ETF (ETHA) jumped 43% in the month.

Additionally, interest in blockchain-related innovations and digital assets expanded, supporting ETFs such as the Valkyrie Bitcoin Miners ETF (WGMI) and the VanEck Digital Transformation ETF (DAPP), up 37% and 42%, respectively. These funds, which invest in crypto miners and blockchain technologies, benefited from the bullish market environment. 

Traditional equity sector ETFs were led by the Consumer Discretionary Select Sector SPDR (XLY) and the Financial Select Sector SPDR (XLF), benefiting from strong economic indicators and investor sentiment. Small-cap ETFs like the iShares Russell 2000 ETF (IWM) outperformed their large-cap counterparts.

Consumer discretionary stocks in XLY surged due to robust GDP growth and resilient consumer spending, with retail, travel, and leisure companies thriving.

Meanwhile, XLF gained momentum as the financial sector capitalized on increased economic activity and optimism around a stabilized interest rate environment, as well as potential for Trump deregulation.

Seasonal trends, including November’s historical tendency to deliver strong equity performance amid increased holiday consumer activity, also bolstered these sectors.

Crypto Tops Best-Performing ETFs

Best ETFs are the largest by AUM representing a range of top-performing asset types, sectors and categories in November 2024.

Sector ETF Outlook for 2025: Soft Landing Scenario

The sector ETF outlook for 2025 depends largely on the direction of inflation. If the overall cost of goods and services can continue to decline, an economic soft landing is achievable. This environment might support the financials and materials sectors, as well as small caps and value stocks: 

Small Caps, Value and Financials

If falling inflation enables the Fed to cut interest rates, financial institutions might benefit from increased lending activity, though the margin impacts vary by institution type. With lower borrowing costs and improving economic conditions, small-cap and value stocks in the U.S. would also benefit.

Materials

Emerging markets and developed nations alike are focusing on infrastructure renewal and green energy projects, driving demand for raw materials like steel, copper, and lithium. Stabilized or rising commodity prices, often influenced by global growth, may also boost revenue for companies in mining and raw materials processing. 

Sectors to Underperform With Sticky Inflation

If inflation remains stubborn in 2025, certain sectors might underperform due to increased input costs, reduced consumer spending power, and potential interest rate adjustments by central banks: 

Consumer Discretionary

High inflation erodes disposable income, reducing spending on non-essential goods and services. Sectors like retail, travel, and luxury goods could struggle as consumers prioritize necessities over discretionary purchases. 

Technology

Rising costs of materials and labor, combined with higher interest rates often used to combat inflation, can dampen growth for technology companies. High valuations in the sector may also face pressure as borrowing costs increase and future earnings are discounted more heavily. 

Utilities

As defensive and heavily regulated entities, utility companies often struggle to pass on rising costs directly to consumers. Higher interest rates could further weigh on the sector, given its capital-intensive nature and reliance on debt for expansion and maintenance. 

Healthcare

While healthcare is considered a defensive sector, inflation-driven cost increases for supplies, pharmaceuticals, and labor might compress margins. Furthermore, political pressures to control healthcare costs could limit pricing power.