The start of 2017 has been great for the U.S. stock market with the major benchmarks scaling new highs on several occasions amid bouts of volatility. While the combination of factors like Trump trade, returns to earnings growth, solid economic data, and prospects of rate hike fueled the rally, protectionist and anti-trade Trump policies, fears over political instability and expensive valuation continued to weigh on stock returns.

Given this, several events impacted the ETF world in either a positive or negative way. Below we have discussed some of those that dominated the headlines in 1Q:

Hot Healthcare

The healthcare sector hit the headlines for the most part of the first quarter. In early January, Trump criticized drugmakers by saying that they are “getting away with murder” by charging too much for their products. As Americans consume maximum pharmaceutical drugs in the world, Trump pledged to initiate a bidding process for drug cost. This move had wiped out about $25 billion in value from the nine biggest pharmaceutical companies of the S&P 500 on that single day (read: Trump Attacks Biotech & Pharma: ETFs Bleed).

Donald Trump’s tweet on increasing competition and lowering drug prices sent a fresh round of shockwaves across the space on March 7. Additionally, Trump’s budget blueprint, which signaled higher regulatory costs for the sector and a cut in federal funding for medical research, pushed the healthcare stocks down further.

As Trump prioritized healthcare reform over tax reform, the overhaul of the U.S. healthcare system was most talked about. But finally, the bill to repeal and replace the Affordable Care Act, also known as Obamacare, with American Health Care Act (AHCA) was abandoned last week due to lack of support from Congress Republicans. While this was encouraging news for the entire healthcare sector, hospital stocks were the biggest winners.

Despite twist and turns, healthcare ETFs are among the top performing ETFs so far this year with the ultra-popular Health Care Select Sector SPDR Fund XLV rising 8.4%. In fact, BioShares Biotechnology Clinical Trials Fund BBC has been leading the way with 27.6% gains. Both funds have a Zacks ETF Rank of 3 or ‘Hold’ rating (read:Trumpcare Collapse Fuels Rally in Healthcare Stocks & ETFs).

Dow Sets New Milestones

The Dow Jones Industrial Average was the biggest beneficiary of the rotation in leadership in the large cap domestic space. This is because the index topped the 20,000 mark for the first time on January 25 and then 21,000 in just 24 trading sessions, marking the fastest move of 1,000 points since 1999. Further, the Dow reached another milestone on February 27 as it closed at a record high for the twelfth consecutive day, marking the longest winning streak since 1987 (read: Dow Jones Hits 12th Session of Record High: ETFs in Focus).

The incredible move came on enthusiasm over Trump’s pro-growth policies of increased government spending, reduced regulations and tax cuts that would boost economic growth and create more jobs in the country. Additionally, the strong comeback by corporate earnings in the fourth quarter added to the strength. Notably, Q4 earnings set an all-time quarterly record with the highest growth in two years.

However, political concerns engulfed the stock market in the final month of the first quarter and erased most of the gains made in the year. The most alarming among the worries is the collapse of the healthcare bill last week that led to the worst weekly performance since election (read: Trump Trade Fades: Top and Flop ETFs of Last Week).

SPDR Dow Jones Industrial Average ETF DIA hit a record high of $211.59 on March 1 and then retreated. The fund is up 4.5% year to date and has a Zacks ETF Rank of 3 with a Medium risk outlook.

Dovish Fed

At the FOMC meeting in March, the Fed raised interest rates for the third time in a decade by a quarter percentage points to 0.75–1%, citing strong economic data and rising inflation, which is heading toward the 2% target. Additionally, the central bank hinted at a more gradual pace of rate hikes this year even if inflation runs above the 2% target, reiterating its outlook of two more rate hikes this year and three in the next. This indicates an accommodative monetary policy for more months.

The move led to surprising winners and losers as bond yields and gold surged following the meeting while greenback and financials nosedived. The trend continued given that SPDR Gold Trust ETF GLD and iShares 20+ Year Treasury Bond ETF TLT rose more than 4% over the past 10 days. On the other hand, PowerShares DB US Dollar Bullish Fund UUP and Financial Select Sector SPDR Fund XLF shed 2.2% and 5.2%, respectively. GLD and UUP have a Zacks ETF Rank of 3. XLF has a top Zacks ETF Rank of 1 or ‘Strong Buy’ rating while TLT has a miserable Zacks ETF Rank of 5 or ‘Strong Sell’ rating (read: See How ETFs React When Hawks Act Like Doves).

Snapchat IPO

Snapchat, touted as the fastest-growing and hottest social media network, made a sizzling debut on the New York Stock Exchange under the symbol ‘SNAP’ on March 2. The IPO was strongly greeted by investors as its shares soared as much as 53.2% during the first day of trading and were up 44% at the close. The buzz over SNAP, the first tech IPO of the year and the largest since Alibaba BABA went public in 2014, faded soon after analysts assigned it neutral or negative ratings that made it one of the worst-rated stocks on Wall Street (read: Should You Invest in Snap Via IPO ETFs?).

However, the outpouring of of bullish ratings from several Wall Street banks on March 27 swept away the negative sentiments on the stock. This propelled the share price of SNAP by 4.8% on the day. The stock is currently 40% higher than the IPO price of $17 but well below its 19% peak on its second day of trading. Given recovering sentiments, investors should easily tap SNAP through Renaissance IPO ETF IPO, First Trust US Equity Opportunities ETF FPX, and Global X Social Media Index ETF SOCL.

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Alibaba Group Holding Limited (BABA): Free Stock Analysis Report

ISHARS-20+YTB (TLT): ETF Research Reports

SPDR-DJ IND AVG (DIA): ETF Research Reports

SPDR-GOLD TRUST (GLD): ETF Research Reports

PWRSH-DB US$ BU (UUP): ETF Research Reports

SPDR-HLTH CR (XLV): ETF Research Reports

SPDR-FINL SELS (XLF): ETF Research Reports

RENAIS-IPO ETF (IPO): ETF Research Reports

GLBL-X SOCL MDA (SOCL): ETF Research Reports

BIOSH-BIO CLNCL (BBC): ETF Research Reports

FT-IPOX 100 (FPX): ETF Research Reports

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