4 ETF Sectors That Outperformed the S&P 500 Over the Past Five Years

The past five years have been crucial for global markets as we navigated the COVID-era market shock, global monetary policy easing, and the launch of fiscal stimuli, followed by subsequent market recovery and the winding down of those stimuli. These years also witnessed the rise of inflation concerns and the resulting interest rate hikes in several countries.

As if these challenges were not enough, geopolitical tensions spiked in the Middle East and Eastern Europe. The United States has also experienced the same flow of events, with its key equity index, the S&P 500, delivering an annualized return of 14.43% over the past five years, as evidenced by the performance of the SPDR S&P 500 ETF Trust SPY.

COVID Era Market Shock

The onset of the COVID-19 pandemic in early 2020 led to an unprecedented market crash. The S&P 500 lost more than 30% of its value in just a few weeks as lockdowns, supply-chain disruptions and plummeting consumer confidence weighed heavily on the global economy. Central banks and governments around the world responded swiftly with aggressive monetary and fiscal policies to stabilize markets and support economic activity.

In the United States, the Federal Reserve slashed interest rates to near zero and launched massive asset purchase programs, injecting liquidity into the financial system. Simultaneously, the federal government rolled out trillions of dollars in fiscal stimulus, including direct payments to households, enhanced unemployment benefits, and support for businesses. These measures not only prevented a prolonged economic downturn but also set the stage for a rapid market recovery.

Post-COVID Market Dynamics

Following the initial shock, markets began a remarkable rebound, with the S&P 500 reaching new highs by the end of 2020. However, the recovery was uneven, favoring certain sectors and asset classes over others. As the pandemic reshaped consumer behavior, technology adoption accelerated, supply chains evolved, and new investment themes emerged.

The Fed Policy Transition

Due to massive policy easing amid the pandemic and pent-up demand post pandemic, U.S. inflation hit a 40-year high. We thus saw a hawkish Fed in 2022. Heightened rising rate worries amid super-hawkish cues from the Fed even bummed Wall Street in that year. However, back-to-back rate hikes helped the U.S. inflation cool down and the Fed started to cut rates all over again from September 2024. The year 2024 witnessed the total number of cuts in interest rates to 100 bps.

All the above-mentioned changes created opportunities for specific exchange-traded funds (ETFs) to outperform the broader market or the S&P 500. Below, we highlight a few of them. These ETF areas have topped the S&P 500 on an annualized basis over the past five years.

Cryptocurrency ETFs

Grayscale Ethereum Trust ETF ETHE – Up 53.8%

Grayscale Bitcoin Trust ETF GBTC – Up 49.1%

Bitcoin prices doubled in 2024 while Ethereum prices gained about 40%. The rally was backed by the launch of cryptocurrency-based ETFs, and President-elect Trump’s crypto-friendly stance to make the United States “the crypto capital” has pushed the currency in the latest months (read: Bitcoin to Hit $2,00,000 in 2025? ETFs in Focus).

FANG+

MicroSectors FANG+ ETN FNGS – Up 32.3%

The artificial intelligence (AI) boom has been another highlight over the past five years. The Big Tech is leaving no stone unturned to boost the area. Capital investments targeted at AI by the Big Tech has been huge, causing a rally in FNGS ETN.

Materials ETFs

Sprott Uranium Miners ETF URNM – Up 30.1%

Global X Uranium ETF URA – Up 24.8%

Uranium stocks surged due to the AI boom. Nuclear energy is rapidly emerging as a choice for powering AI systems due to its ability to provide a stable, high-output source of electricity. This seems to be a more reliable energy source. Being an essential component in sustainable and reliable energy generation, the growing interest in nuclear energy has led to an optimistic outlook for Uranium. But the supply of uranium is in a crunch, which led to a rally in these ETFs (read: Nuclear Energy Charging Up to Power AI: Buy ETFs on Dip?).

Semiconductor ETFs

VanEck Semiconductor ETF SMH – Up 29.5%

iShares Semiconductor ETF SOXX – Up 22.6%

This is yet another AI winner. The space has been spearheaded by the chip industry behemoth NVIDIA NVDA. NVDA shares have skyrocketed from $6.11 per share to $140.11 over the past five years, explaining the rally in semiconductor ETFs. Not only NVIDIA, other chip makers have also been following the winning suit (read: Play Foxconn-Led Global Chip Stock Surge With These ETFs).

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