ETF Market Expanded in 2022 Through Bear Market But Took Hits

Optimists were still to be found in the world of US exchange-traded funds, where more than 400 new ETFs were launched despite a harsh bear market. Funds took in more than half a trillion dollars as more investors learned to embrace their easier-to-trade and tax-friendly structure.

Still, the $6.5 trillion industry was shaken by market turmoil. Many funds saw sharp drawdowns as equities and fixed-income strategies slumped beneath the Federal Reserve’s rate hikes to battle inflation. Trendy new ETF themes burned bright and then faded. Commodity funds rode sharp price increases driven by the war in Ukraine and Russian sanctions.

Here’s a quick tour of how ETFs fared in 2022:


Near-record launches: The market gloom did little to discourage new fund entrants, as 430 ETFs came to market, the second-most ever after a record following 2021’s 459 launches, data compiled by Bloomberg show. “The ETF vehicle gives investors control, and then the variety gives them precision,” Bryon Lake, global head of ETF Solutions at JPMorgan Asset Management, said last month.

Energy ruled: Only one S&P 500 sector gained in all of 2022: energy. It surged roughly 60% for the year, meaning that some of the best-performing ETFs also belong to that category. The Energy Select Sector SPDR Fund (ticker XLE) added more than 57% during 2022, as did the Fidelity MSCI Energy Index ETF (FENY). Eight of the 10 top-performing funds last year were related to the energy sector, according to data compiled by Bloomberg. “Energy outperformed everything last year,” said Mohit Bajaj, director of ETFs at WallachBeth Capital. “Part of it was supply crunch and of course increased demand.”