It'll be an interesting year for exchange-traded funds.
ETF industry leaders are watching a handful of themes they see gaining traction in 2020, two such leaders — John Davi, founder and chief investment officer at Astoria Portfolio Advisors, and Armando Senra, head of iShares Americas at BlackRock — told CNBC's "ETF Edge" on Monday.
Here are the top six themes they expect to drive returns this year.
"In 2019, we saw growth in fixed-income ETFs, tremendous growth in fixed-income ETFs, in factors and [in] ESG, and we believe that will continue into 2020," Senra, who in September predicted on "ETF Edge" that the $1 trillion fixed-income ETF market would double in the next five years.
Fixed-income funds accounted for about half of 2019's net ETF inflows and are set to attract even more this year, said Senra, whose firm runs the largest fixed-income ETF on the market, the iShares Core U.S. Aggregate Bond ETF (AGG).
"If you look at fixed-income ETFs, they're less than 2% of the global fixed-income market," he said. "So, plenty of runway for growth, and it's not about the market sentiment. It's about the substitution of bonds for fixed-income ETFs to gain exposure to the bond market. So, that's what's going to fuel the growth."
While Davi favored the banks for his 2020 strategy, he wasn't partial to one of their most popular trading vehicles: the Financial Select Sector SPDR Fund (XLF).
"If you're going to hone in on one ... U.S. secular theme on a multi-year basis, I think large-cap banks are pretty attractive. KBWB is our pick," he said, referring to the Invesco KBW Bank ETF.
These big banks — many of which report earnings next week — "don't have the leverage that they used to have" and are reaping benefits from their sizable wealth management businesses, Davi said, adding that at 12-13 times earnings, the group is "cheap" relative to the S&P 500.
One of Davi's other picks for 2020 was a fund run by Senra's firm: the iShares MSCI China ETF (MCHI), the biggest China ETF on the market by assets.
"We've been bullish for a while," he said Monday. "I think there's a good macro story for owning it. There's a fundamental story. So, the macro is that China's injecting a lot of liquidity. The fundamental story is that you've got more earnings ... growth in China than you do in the U.S."
If you ask Senra, "there's a place for China in a client's portfolio, and it's a theme that we believe will evolve and will continue to make a lot of sense for many, many years to come."
There was a broader theme Senra found even more attractive than just China, however.
"For 2020, we're also very positive on emerging markets, so, not necessarily China," Senra said. "I think that a lot of the monetary policy stimulus that we saw in  is behind us. In the case of emerging markets, there's more room to move. They can continue to lower rates and they will also benefit from global trade, a more stable global trade environment, and [from] a pickup in growth. So, actually, for 2020, we are more optimistic on emerging markets."
iShares runs the iShares MSCI Emerging Markets ETF (EEM), the third-largest emerging-market ETF by total assets.
Commodities may not only work this year, but for the entire 2020-2030 decade, according to Davi.
"Commodities have been largely under-owned the last 10 years, so any pickup in inflation, commodities should do better," said the investor, who expects inflation to tick up in the decade ahead.
In general, commodities like oil and gold are good to own in times of market turmoil that is brought about by exogenous events, like the U.S.-Iran tiff that occurred at the start of this week, Davi said.
To him, those days "were perfect examples why commodities serve a good role in a portfolio," he said. "There's this term called positive skewness, which means that Middle East conflict happens, oil goes up, gold goes up, energy equities go up. So, that's very different from U.S. stocks, which we would say have negative skewness where they just go down. So, I think commodities are very cheap. Nobody's talking about it. I think there's upside."
Lastly, Senra doubled down on a separate Asian market.
"We are also positive on Japanese equities for the same reason [as emerging markets]: a pickup in growth, a pickup in manufacturing and a pickup in global trade," said Senra, whose firm also runs the iShares MSCI Japan ETF (EWJ). "So, we actually turned positive for 2020 on Japanese equities."
Correction: This story has been updated to reflect that Senra was referring to 2019 in his comment about stimulus from Chinese monetary policy.