Trending sub-sectors in 2022

Sub-sectors explained

To dive into trending sub-sectors, it is important to define what a sub-sector is in the context of investing. The main sectors as defined by the Global Industry Classification Standard (GICS) are:

• Communication Services
• Consumer Discretionary
• Consumer Staples
• Energy
• Financials
• Health Care
• Industrials 
• Information Technology
• Materials
• Real Estate
• Utilities

However, drilling down further, there are 24 defined industry groups, 69 industries, and 158 sub-industries. 

A sub-sector can be anything that falls within a main GICS sector, so a sub-sector can either be an industry group, industry, or sub-industry for the purposes of this article.

Trending sub-sectors thus far in 2022

Oil & Natural Gas

Within Energy, Oil, and Natural Gas ETFs have performed exceptionally well. With the top performance YTD belonging to various oil and natural gas funds such as:

• UGA (United States Gasoline Fund) +71.9% YTD
• BNO (United States Brent Oil Fund) +60.1% YTD
• UNG (United States Natural Gas Fund) +57.1% YTD
• DBE (Invesco DB Energy Fund) +55.8% YTD
• USO (United States Oil Fund) +50.9% YTD

Metals & Mining

Along with energy commodities such as oil and natural gas, other commodities have also performed quite well this year. An example of this is the strong performance by mining companies. Mining companies fall within the Materials sector, and some examples of mining ETFs are:

• XME (SPDR S&P Metals & Mining ETF) -6.9% YTD
• PICK (iShares MSCI Global Metals & Mining Producers ETF) -17.5% YTD
• REMX (VanEck Rare Earth/Strategic Metals ETF) -25.7% YTD
  Agriculture Producers

With Russia’s invasion of Ukraine, there is a global crisis of fertilizer that has increased the importance of agricultural production as the world faces a potential food shortage, especially in developing markets. Therefore, another trending sub-sector includes companies which are involved in the production of agriculture. Some example of agriculture ETFs include:

• DBA (Invesco DB Agriculture Fund) -1.0% YTD
• RJA (Elements Rogers International Commodity Index-Agriculture Total Return ETN) +1.7% YTD
• FAAR (First Trust Alternative Absolute Return Strategy ETF) +12.4% YTD
• WEAT (Teucrium Wheat Fund) +11.7% YTD

Pharmaceuticals

This year has seen a broad-based sell off in high growth sectors such as technology. However, more stable sectors that have inelastic demand for their products are able to outperform in these conditions. This includes the subsector of pharmaceutical companies. Some examples of Pharmaceutical ETFs include:

• PPH (VanEck Pharmaceutical ETF) +0.8% YTD
• IHE (iShares U.S. Pharmaceuticals ETF) -2.3% YTD
• PJP (Invesco Dynamic Pharmaceuticals ETF) -4.8% YTD

Insurance

Within the Financials sector, the insurance industry benefits from rising rates and relatively inelastic demand, especially in the property & casualty insurance space. Some examples of Insurance ETFs include:

• KIE (SPDR S&P Insurance ETF) -4.9% YTD
• IAK (iShares U.S. Insurance ETF) -0.1% YTD
• KBWP (Invesco KBW Property & Casualty Insurance ETF) +2.5% YTD

Data for this article is as of July 5th, 2022.