Q4 Sector and Industry Dashboard
US equities continued to rally in Q3, refreshing new record highs on the back of strong earnings beats and optimism of economic recovery. Cyclical sectors — including Consumer Dictionary, Materials and Industrials — led performance in Q3, as investors bet on significant earnings recovery in these sectors given stronger-than-expected consumer spending and manufacturing activities during the economic reopening. However, market sentiment turned sour in September as investors shifted their focus to rising COVID-19 cases, diminishing hope for additional fiscal stimulus by the end of this year and election uncertainty.
Although investors dialed down their tactical sector positions and took profits on high-flying mega-cap Technology stocks at the end of Q3, they continued to show strong interest in thematic ETFs to target long-term secular trends. Funds focused on secular trends, such as Clean Energy and Future Communications, as well as broad innovations, took in $18 billion so far this year, representing 46% of organic growth from flows.
Despite expected short-term volatility heading to the 2020 election, the long-term secular trends emerging from the pandemic seem irreversible and present growth opportunities, from the re-boom of the internet, to the evolution of freight transportation and the preference for home ownership.