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4 Sector ETFs That Gained the Most From Election Rally

Wall Street posted its strongest weekly gains since April in the post-election rally on strong optimism over a potentially divided Congress. Democratic candidate Joe Biden is likely to gain the control of the White House while Republicans may keep the Senate.

Per the latest ballot counting, Biden has become the presumptive president-elect of the United States by taking lead in key states, including Pennsylvania, Georgia and Nevada. Associated Press revealed that Biden crossed the 270-vote threshold in the Electoral College in a tight race with Donald Trump with a total of 284 votes. Though Biden wins, the winner has not yet become official.

The combination will lower the chances of major tax increases and tighter regulations, which could not only crimp corporate profits but also diminish the prospect of a major stimulus package in the near term (read: Sector ETFs & Stocks to Make the Most of a Divided Congress).

Notably, the Dow Jones gained more than 7% last week while the S&P 500 has risen nearly 8%. The Nasdaq Composite Index has outperformed, gaining 9% primarily driven by a tech surge.

While there have been winners in many corners of the space last week, a few sectors have enjoyed a strong election rally beating the market returns. Here we highlight one ETF from these sectors that gained in double digits last week and could continue to do so amid the political gridlock.

Global X Cannabis ETF POTX – Up 22.2%

Democratic nominee Joe Biden's lead in election reflects a major boost for the U.S. cannabis industry. This is because democrats have committed to decriminalize marijuana at the federal level in the United States if they win. Additionally, five states legalized marijuana through ballot measures. New Jersey, Arizona, and Montana approved legal recreational marijuana for adults over the age of 21. Mississippi approved medical use, while South Dakota approved both recreational and medical use at one time.

POTX seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 23 stocks in its basket, with Canadian firms accounting for 84.7% of assets while Britain and the United States take 7.5% and 6.5% share, respectively. The product has accumulated $15.6 million in its asset base and trades in an average daily volume of 25,000 shares. Expense ratio comes in at 0.50%.

Global X Lithium & Battery Tech ETF LIT – Up 15.3%

Rise in demand for electric vehicles, in which lithium is used for batteries that power the cars, helped this ETF to move higher. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 41 securities in its basket, charging investors 75 bps in annual fees. The fund has amassed $938.6 million in AUM and trades in an average daily volume of 444,000 shares (read: 5 Sector ETFs That Showed Strength Despite the Worst October).

Global X Social Media Index ETF SOCL – Up 12.8%

The split Congress will limit the new legislation in the tech sector and dims the prospect of an antitrust breakup of mega-cap tech companies. While most of the tech ETFs have been on the rise, SOCL was the biggest gainer last week. This fund provides investors access to social media companies around the world and has amassed $237.4 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 39 securities in the basket. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 46,000 shares a day. The fund has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: 5 Tech ETFs Leading the Post-Election Rally).

The Innovator Loup Frontier Tech ETF LOUP – Up 10.7%

The resurgence in the COVID-19 cases and the lockdown measures in Europe continued to accelerate demand for Internet for everything ranging from remote working to entertainment and shopping. This ETF tracks the Loup Frontier Tech Index, which measures the performance of companies that influence the future of technology including artificial intelligence, computer perception, robotics, autonomous vehicles, virtual reality, and mixed/augmented reality. It holds 30 stocks in its basket and charges 70 bps in annual fees. The fund trades in an average daily volume of 3,000 shares.

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Global X Lithium Battery Tech ETF (LIT): ETF Research Reports
Global X Social Media ETF (SOCL): ETF Research Reports
Innovator Loup Frontier Tech ETF (LOUP): ETF Research Reports
Global X Cannabis ETF (POTX): ETF Research Reports
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