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Investing.com -- Bank of America highlighted ten key investment themes that have outperformed the broader market this year and pointed to exchange-traded funds (ETFs) offering exposure to each.
The report identifies leading ETFs for each theme, including iShares MSCI Global Gold Miners (RING), Global X Uranium (URA), Global X Defense Tech (SHLD), Invesco WilderHill Clean Energy (PBW), SPDR Gold MiniShares Trust (GLDM), iShares MSCI Mexico (EWW), Global X Artificial Intelligence & Technology (AIQ), First Trust RBA American Industrial Renaissance (AIRR), iShares Convertible Bond (ICVT), and Invesco S&P Global Water (CGW).
These themes, ranging from AI and defense to gold and infrastructure, “can add diversification without sacrificing returns,” BofA strategist Jared Woodard said, noting that nine of the ten trade at lower price-to-book (P/B) valuations than the S&P 500.
He highlighted that top-performing ETFs such as RING, URA, and SHLD have far outpaced the index year-to-date, gaining 121%, 86%, and 80%, respectively, versus the S&P 500’s 16%.
BofA attributed much of the outperformance to strong structural tailwinds. It said AI may deliver anything from a temporary GDP boost to “something far more dramatic,” while policy shifts toward self-reliance are fueling defense technology and infrastructure spending.
Record central bank gold purchases have lifted precious metals, with miners now using free cash flow to reward shareholders.
Other themes include clean energy, where PBW has risen 65% this year, and Latin America, where EWW is up 42% on the back of a mining boom and easier monetary policy.
Convertibles are also gaining traction as AI-linked names now make up 20% of the global convertible market, while CGW offers exposure to water scarcity and infrastructure investment.
“Thematic investing means capturing catalysts,” the note says.
“Themes can be volatile, so they’re best suited for active investors. Even so, over the past five years several themes have provided market-beating absolute and risk-adjusted returns and moderate-to-low correlation to equities,” it adds.