Disruptive Theme of the Week: Top-Performing Themes Look Like 2020

As is often the case, performance does not always align with investor interest and inflows, which remain focused on themes like AI and Infrastructure. So, let’s take a closer look at some of the investment themes that are working so far this year and some of the ETFs that provide exposure.

The price of gold has rallied to new highs fueled by fears of an escalating global trade war under the Trump administration. However, there is more behind gold’s rally than just tariffs. The most important driver in recent years has been China and India consumer demand, which, according to the World Gold Council,. accounts for more than half (53%) of global demand. Investors also appear to be flocking to gold as a safe-haven asset amid rising geopolitical tensions and as a hedge against potential tariff-driven inflation.

One of this year’s top-performing gold ETFs is the WisdomTree Efficient Gold Plus Gold Miners Strategy (GDMN ). The ETF blends gold futures and gold mining stocks as a means to hedge against financial, geopolitical, or inflation risk. YTD, the ETF is up 32.16% and has an impressive one-year turn of 97.95%. Also due some consideration are gold mining ETFs, such as the +iShares MSCI Global Gold Miners ETF (RING B+), the VanEck Gold Miners ETF (GDX B+), and the Sprott Gold Miners ETF (SGDM B-), all up more than 20% YTD, which is twice the YTD return of physical gold ETFs like the SPDR Gold Shares (GLD A-) and the GraniteShares Gold Trust (BAR A-).

I had the opportunity to do some research recently on video gaming for an upcoming white paper associated with VettaFi’s new Video Game Leaders Index (VGAME), now tracked by the Amplify Video Game Leaders ETF (GAMR C).

After seeing peak levels of video gaming interest during the pandemic, video gaming is making a comeback, with improved monetization strategies and technologies like AI to offset high production costs. There are also some upcoming industry catalysts this year, such as the release of Grand Theft Auto 6 (which cost over $1 billion to produce!) and the new Nintendo Switch 2.0. As seen in the table below, video gaming ETFs as a group have been “killing it.”

Another thematic ETF category that has been outperforming YTD is online retail. This is another example of an investment theme that flourished during the pandemic and, after a period of excess capacity, appears to be back on track and disrupting retail. According to the US Census Bureau,. Q4 2024 e-commerce sales grew 9.4% on a year-over-year basis versus only 3.8% for retail as a whole.

Online retail remains the sweet spot of retail consumption thanks to convenience, selection, and fast shipping options. However, the traditional retail model continues to languish. Big Lots, Party City, the Container Store, Joann Fabrics, and Forever 21 are among the latest brick-and-mortar retailers to falter.

Online retail ETFs like the Amplify Online Retail ETF (IBUY C+) and the ProShares Online Retail ETF (ONLN B) are up 14.49% and 12.2%, respectively, YTD, while the SPDR S&P Retail ETF (XRT B+) is down 1.08%.

Streaming media is another hot thematic category off to a great start this year. The MUSQ Global Music Industry ETF (MUSQ B) and the First Trust Streaming and Gaming ETF (BNGE ) are up 13.05% and 15.46%, respectively, each on the strength of the recurring revenue subscription model and digital distribution.

MUSQ has rallied due to strong performance from top holdings such as Spotify (40.95%), Universal Music Group (17.85%), and Live Nation (19.43%). Music remains a cheap source of entertainment in a sea of many media options.

Until recently, media companies have been pushing to overcome problems with expensive content and subscriber turnover while operating in a highly competitive environment. But in 2024, streaming companies finally turned profits by combating customer subscription fickleness with bundled services and paid advertisements. These positive trends have benefited many of the companies held in the BNGE ETF.

Another comeback worth mentioning is the performance among ARK’s active thematic ETFs. Several of ARK’s ETFs appear on the path to return to their post-2020 performance highs.

However, one of the top-performing thematic ETFs YTD, wasn’t even around in 2020. However, I would be remiss not to mention it. The AdvisorShares Psychedelics ETF (PSIL C+) is up 32.98% so far this year. The fund offers exposure to the emerging psychedelic drugs industry.

Psychedelics are seeing their usage as treatments for mental health issues expand. Numerous studies have highlighted the benefits of psychedelic therapies to treat conditions such as depression and PTSD. In addition, this theme is a Trump trade, given that Elon Musk and Robert F. Kennedy Jr. advocate for these therapies.

Will these thematic performance trends prevail for the remainder of the year? It may be too early to tell, but this year looks eerily similar to 2020.

VettaFi LLC (“VettaFi”) is the index provider for GAMR, IBUY, MUSQ, BNGE, for which it receives an index licensing fee. However, GAMR, IBUY, MUSQ, BNGE are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GAMR, IBUY, MUSQ, or BNGE.

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