Thursday's Market Minute: 2019 Through ETFs

Today marks the first trading day of 2020. The start of a new year is as much a time to reflect as it is to look ahead. Stocks rallied in 2019 – the S&P 500 climbed 28%, its largest gain since 2013 – causing some investors to anticipate that little room is left for the markets to grow this year. Exchange-traded funds (ETFs) offer a helpful way to understand the year’s top performers. Comparing the three ETFs that track the major U.S. equity markets, SPY, QQQ, and DIA, shows that over the past year, the technology-heavy QQQ fund that tracks the Nasdaq-100 outperformed the other two, having gained about 38% year-over-year.

The Dow Industrial fund came up short, only gaining about 22%, while the SPY gained about 29%. Within all three of these funds, the most heavily weighted sector is technology. The second most represented sectors in these funds are what differentiate them from one another, however. After tech, the SPY is comprised mostly of health care stocks. In the QQQ, the next most represented sector is communication services, and in the DIA, it is industrials. What further supported the QQQ’s nearly 10% lead on the SPY is its representation of stocks in the S&P 500 Communication Services sector (XLC), which was the 2nd best performing sector in the year, next to Technology.

One company, however, is among the top five holdings based on weighting in all three ETFs: Apple Inc. AAPL. Shares of AAPL have gained about 85% over the past year, which has supported some of the growth in these ETFs, but none so much as the QQQ. The top holding in the QQQ, AAPL’s yearly growth far surpassed the other big tech names like MSFT, AMZN, FB, and GOOGL that make up the QQQ’s top holdings, and is likely at least partly responsible for the growth in the SPY and DIA as well.

Information from TD Ameritrade Network is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

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