Saxo Group
Summary: ETFs offer an way to get exposure to a trading theme, geographical region or other submarkets through a single instrument. Below we demonstrate a fraction of the possibilities to focus or diversify your portfolio with ETFs.
ETFs are typically covering either specific asset classes, geographical regions, or investment themes, and the latter has really gained interest during the past years. As mentioned in this article, this typically comes at a low cost, compared to the cost of acquiring each of the instruments in the ETF individually.
Multiple providers are offering ETFs, such as Amundi, Ossiam, Invesco, iShares, Xtrackers, HSBC, Lyxor and WisdomTree. Below is an example of 10 thematic ETFs and 10 ETFs with different geographical exposure (some of them with specific focus on ESG). They have been selected only for illustrative purposes due to their different themes and should not be considered as any trade considerations. Only UCITS ETFs are shown, as these typically have a KIID document, meaning that they do not have the same trade restrictions as some of the larger US ETFs which cannot be traded in some jurisdictions, unless you have status as being a professional trader.
Examples of thematic ETFs with a variety of trading themes:
Examples of ETFs with different geographical exposure:
What to look out for when trading thematic ETFs?
Note that new ETFs in some time after their launch may have relatively low liquidity compared to established ETFs, so keep an eye out when trading those with a relatively large bid-ask spread. Read more on ETF liquidity here.
Some of the thematic ETFs are created with companies which are mostly is pure-plays within the theme, i.e. where a large parts of the company’s revenue is exposed to the theme. Other ETFs include companies if only a minor part of their revenue is associated with the ETF theme, e.g. for typical cloud computing ETFs which contain companies like Amazon, Alphabet etc. So the price movements in the ETF may be affected significantly by events which are not related to the overall ETF theme.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
