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Top Themes in the First Half of 2024: Crypto, Chips, Ships & Silver

After a torrid risk-on run in the first quarter of 2024, markets cooled off a bit but ended the half still positive with mid-double-digit returns. Technology themes such as cryptocurrency and artificial intelligence helped propel markets higher. However, the higher for longer interest rate environment and signs of economic wear from inflationary pressures had a dampening effect.

Chip-maker Nvidia (NVDA), which benefits from crypto mining and AI demand, was up almost 140% YTD. This gave ETFs holding the stock a nice performance boost. But some of the other top-performing themes in the first half of this year were a little bit of a surprise.

Crypto

After seeing spot Bitcoin ETFs approved in the first quarter of the year, markets were surprised when the SEC seemingly paved the way for approval of spot Ethereum ETFs as well before giving the green light in May. Both Bitcoin and Ethereum are up around 48% for the year. Spot Bitcoin ETFs have amassed more than $52 billion in combined assets in less than six months of trading, marking what is likely the most successful ETF category launch in history.

Besides the spot offerings, Crypto-Themed ETFs were a top performing category in the first half of this year as well. A prime example is the First Trust Sky Bridge Crypto Industry & Digital Economy ETF (CRPT), which is up 35% for the year. Also benefiting were Blockchain-focused products such as the Amplify Transformational Data Sharing ETF (BLOK), up almost 20%.

Semiconductors (Chips)

Semiconductors benefited from demand created by crypto mining, data centers, and artificial intelligence applications. As mentioned, Nvidia has been the chip-stock poster child this year, profiting from this exposure. As a result, levered single-stock ETFs tied to the company’s equity performance saw outsized performance. The GraniteShares 2x Long NVDA Daily ETF (NVDL) was up 329% for the year and collected $4.8 billion in assets under management. In comparison, the Direxion Daily NVDA Bull 2x Shares (NVDU) gained 270% and attracted $384 million in assets.

Among non-levered ETF plays, The VanEck Semiconductor ETF (SMH) is the performance champion YTD, up 46%. The ETF’s 25% position in NVDA helped elevate it to performance winner status. Also performing well in the category were the Invesco PHLX Semiconductor ETF (SOXQ), up 29%, the iShares Semiconductor ETF (SOXX), gaining 27%, and the Strive US Semiconductor ETF (SHOC), which holds only U.S.-listed companies, advancing 26%.

Shipping (Ships)

Shipping ETFs was one of the surprising top themes in the first half of the year. Two ETFs in the category, the SonicShares Global Shipping ETF (BOAT) and the U.S. Global Sea to Sky Cargo ETF (SEA), were up 26% and 19%, respectively.

So, what accounts for the move in shipping stocks and the ETFs that hold them? Rising tensions in the Middle East are impacting the Red Sea, a critical thoroughfare for international shipping. This has caused container ship freight rates to soar. The Drewry’s World Container Index, an index benchmark for ocean container freight rates, increased to $5,117 per 40-foot container recently, for a year-over-year increase of 233%. In addition to the Red Sea bottleneck, stronger-than-expected consumer demand in markets like the U.S. has also caused a surge in shipping needs.

Silver

Another surprise category of outperformance this year has been silver. Both gold and silver have risen to their highest levels since 2013, but silver is up almost twice as much as gold this year, up over 21% YTD.

Why silver? Unlike gold, which is mainly used as a store of wealth or for jewelry, silver has industrial uses as well. For example, the next generation of solar panels are more silver-intensive. Pure silver, as opposed to gold, is more difficult to mine as most of it is produced in the process of mining other metals like copper, gold, lead, or zinc.

Fortunately, ETF investors do not need to go mining to get exposure to the rally in silver, with both physical commodity silver ETFs and silver mining stock versions available. For geared physical silver exposure, the ProShares Ultra Silver (AGQ), a 2x daily levered ETF, is up almost 35% YTD. There are also non-levered silver vehicles as well including the abdrn Physical Silver Trust (SIVR), and the iShares Silver Trust (SLV), all up over 21% just like the spot metal.

Silver Mining ETFs have not kept up with their spot commodity peers but have exhibited strong performance this year as well, a little less than one-half what physical silver delivered. ETF plays here are the iShares MSCI Global Silver Miners ETF (SLVP), the Amplify Junior Silver Miners (SILJ), and the Global X Silver Miners ETF (SIL).

Next Half Theme?

Within health care, the GLP-1 weight loss drug theme has emerged as an industry disruption akin to artificial intelligence in technology. Will GLP-1 be to health care what AI has been to technology in the second half of the year?

Two new ETFs launched in this category in May, the Amplify Weight Loss Drug and Treatment ETF (THNR), which tracks a VettaFi Index, and the Roundhill GLP-1 Weight Loss ETF (OZEM). In just a month, these ETFs have already amassed $33 million in assets.

To learn more about thematic investing, access a free copy of our comprehensive paper “Investing in Thematics” here.

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