Can Sector-Specific ETFs Still Lure Investors?

If you’re not ready to embrace single-stock exchange-traded funds, there are plenty of more traditional options of ETFs offering investors a variety of ways to target specific sectors while avoiding individual stock risk. 

Are food prices expected to go through the roof, or are oil prices about to crash? There are many consumer staples and energy fund choices to take advantage of these anticipated changes. 

While there are many tools and ways to filter through the ETFs by sector and niche market segments, a traditional classification system like the Global Industry Classification Standard can serve as a starting point.  

Relying on the GICS terminology, we’ve compiled a list of top performers in several sectors to help jump-start your research. 

Energy ETFs 

Energy sector ETFs have benefited from higher oil prices, with the Brent crude oil price up over 30% since the start of the year. 

The Invesco Dynamic Energy Exploration & Production ETF (PXE) has returned 26.22% year to date, according to data compiled by ETF.com, making it the top performer among the sector-specific ETFs excluding inverse and leveraged ETFs. This fund tracks the performance of the Dynamic Energy Exploration & Production Intellidex Index, which consists of 30 U.S. companies engaged in the exploration, extraction and production of crude oil and natural gas. 

Other robust performers include the Energy Select Sector SPDR Fund (XLE), which has a 24.03% year-to-date return, and the Vanguard Energy ETF (VDE), which has returned 23% so far this year. 

Consumer Staples 

The consumer staples sector, which is traditionally considered a safe haven during inflationary times, has been uneven due to rising costs of labor, shipping costs and demand for low-margin food. 

The Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS) has retreated -0.29% year to date, but it is up 7.4% over the past year. 

The Consumer Staples Select Sector SPDR Fund (XLP), which is issued by State Street Global Advisors and is the largest consumer staple ETF, with $15.5 billion under management, is down -4.5% year to date according to data compiled by ETF.com. 

Health Care 

The health care industry, which includes everything from pharmaceutical companies to the manufacturers of surgical tools, has also been an uneven performer. 

The Invesco S&P 500 Equal Weight Health Care ETF (RYH) is down 14.8%, the Fidelity MSCI Health Care Index ETF (FHLC) is down 9.9%, and the SPDR S&P Health Care Equipment ETF (XHE) has retreated 24.9% year to date. 

And the Health Care Select Sector SPDR Fund (XLV), which has returned 13.23% over the past three years, is down 7.8% so far this year.