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Wall Street is continuously grappling with various macroeconomic headwinds. Persistently high inflation levels, aggressive stance of the Federal Reserve on interest rate hikes, resurging COVID-19 cases in China causing full/partial regional lockdowns and uncertainty surrounding the Russia-Ukraine war crisis are hurting market sentiments. Also, the renewed concerns that the COVID-19 and war woes might cause further disturbances to the supply-chain distribution are adding to the market turbulence.
Corporate America is also feeling the heat of these macroeconomic barriers. Two major retailers, namely Target (TGT - Free Report) and Walmart (WMT - Free Report) recently declined 24.9% and 6.8%, respectively, on May 18 as their financials were affected by rising labor, transportation and fuel costs (per a CNBC article). Wall Street also bled profusely as these concerns ignited sell-offs in the market.
The Dow Jones Industrial Average declined 3.6% on May 18, marking its deepest fall since June 2020. The other two broad market indices, the S&P 500 and the Nasdaq Composite, were also down 4.0% and 4.7% each on the same day. The tech-heavy index has witnessed its sharpest decline since May 5.
Commenting on the market, Megan Horneman, chief investment officer at Verdence Capital Advisors said that “The consumer is challenged. We started to see at the end of the year that consumers were turning to credit cards to pay for the rise in food prices, rise in energy prices, and that’s actually gotten much worse. ... This is going to hurt those bellwether retail places and Walmart tends to be one of them,” according to a CNBC article.
However, certain U.S. economic data releases have been encouraging so far. The Department of Commerce reported that retail sales in April were up 0.9% month over month, marginally below the consensus estimate of 1%. Year over year, retail sales grew 8.2% in April. The Federal Reserve reported that industrial production increased 1.1% in April, well above the consensus estimate of 0.5%.
Against the current backdrop, let’s consider some ETF areas for investors to buy the dips:
Technology ETFs
The dip in tech stocks opened up great investing opportunities. JPMorgan Chase strategist Marko Kolanovic also commented that there are “great opportunities in high-beta, beaten-down segments that now include innovation, tech, biotech, emerging markets,” as mentioned in a Bloomberg article.
Technology held an important position in the ongoing health crisis. The pandemic-induced remote/hybrid working model bumped up sales of PCs, laptops and other computer peripherals. Certain other ‘new normal’ trends also emerged amid the health crisis, like growing inclination toward making digital payments, increasing video streaming and soaring video game sales.
The pandemic has been a blessing in disguise for the e-commerce industry so far as people are practicing social distancing and shopping online for all essentials, especially food items. The world is gradually moving toward digitization, increasing the dominance of technology in the financial sector.
Investors willing to be part of the tech space can bet on some top-ranked technology ETFs like Vanguard Information Technology ETF (VGT - Free Report) , The Technology Select Sector SPDR Fund (XLK - Free Report) , iShares U.S. Technology ETF (IYW) and First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) (read: ETF Winners of the Latest Tech Rebound: Crypto Rules).
Clean Energy ETFs
There is a rising awareness of climate-change concerns as the latest reports from government officials highlight the gravity of the issue. Favorable government policies, impressive renewable investments, falling overall cost of generating renewable electricity and the growing adoption of electric vehicles (EVs) might keep supporting the momentum in the space in 2022. There’s no denying that U.S. President Joe Biden is seriously considering the threats behind climate change and is working toward his pledge to cut emissions to half by 2030.
From the perspective of the investment world, the attempts to highlight climate-change concerns can raise attention to clean energy funds that can gain from the rising initiatives to control adverse climate changes. In this regard, market participants can consider funds like iShares Global Clean Energy ETF (ICLN - Free Report) , Invesco Solar ETF (TAN - Free Report) , First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), ALPS Clean Energy ETF (ACES) and Invesco Global Clean Energy ETF (PBD) (read: 5 ETFs Under $20 to Add to Your Portfolio).
Banking ETFs
The current market environment can be highly beneficial to the banking sector in particular. This is because the rising rates will help boost profits for the banks. The steepening of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a chunk of the banks’ revenues, is likely to receive support from the steepening of the yield curve and a modest rise in loan demand.
The progress in coronavirus vaccine rollout presents a strong case,favoring a faster return to normalcy and economic recovery. As the economy starts operating in full swing, banks will be able to deliver an enhanced performance.
Image: Bigstock
Consider These ETF Areas to Buy the Dips
Wall Street is continuously grappling with various macroeconomic headwinds. Persistently high inflation levels, aggressive stance of the Federal Reserve on interest rate hikes, resurging COVID-19 cases in China causing full/partial regional lockdowns and uncertainty surrounding the Russia-Ukraine war crisis are hurting market sentiments. Also, the renewed concerns that the COVID-19 and war woes might cause further disturbances to the supply-chain distribution are adding to the market turbulence.
Corporate America is also feeling the heat of these macroeconomic barriers. Two major retailers, namely Target (TGT - Free Report) and Walmart (WMT - Free Report) recently declined 24.9% and 6.8%, respectively, on May 18 as their financials were affected by rising labor, transportation and fuel costs (per a CNBC article). Wall Street also bled profusely as these concerns ignited sell-offs in the market.
The Dow Jones Industrial Average declined 3.6% on May 18, marking its deepest fall since June 2020. The other two broad market indices, the S&P 500 and the Nasdaq Composite, were also down 4.0% and 4.7% each on the same day. The tech-heavy index has witnessed its sharpest decline since May 5.
Commenting on the market, Megan Horneman, chief investment officer at Verdence Capital Advisors said that “The consumer is challenged. We started to see at the end of the year that consumers were turning to credit cards to pay for the rise in food prices, rise in energy prices, and that’s actually gotten much worse. ... This is going to hurt those bellwether retail places and Walmart tends to be one of them,” according to a CNBC article.
However, certain U.S. economic data releases have been encouraging so far. The Department of Commerce reported that retail sales in April were up 0.9% month over month, marginally below the consensus estimate of 1%. Year over year, retail sales grew 8.2% in April. The Federal Reserve reported that industrial production increased 1.1% in April, well above the consensus estimate of 0.5%.
Against the current backdrop, let’s consider some ETF areas for investors to buy the dips:
Technology ETFs
The dip in tech stocks opened up great investing opportunities. JPMorgan Chase strategist Marko Kolanovic also commented that there are “great opportunities in high-beta, beaten-down segments that now include innovation, tech, biotech, emerging markets,” as mentioned in a Bloomberg article.
Technology held an important position in the ongoing health crisis. The pandemic-induced remote/hybrid working model bumped up sales of PCs, laptops and other computer peripherals. Certain other ‘new normal’ trends also emerged amid the health crisis, like growing inclination toward making digital payments, increasing video streaming and soaring video game sales.
The pandemic has been a blessing in disguise for the e-commerce industry so far as people are practicing social distancing and shopping online for all essentials, especially food items. The world is gradually moving toward digitization, increasing the dominance of technology in the financial sector.
Investors willing to be part of the tech space can bet on some top-ranked technology ETFs like Vanguard Information Technology ETF (VGT - Free Report) , The Technology Select Sector SPDR Fund (XLK - Free Report) , iShares U.S. Technology ETF (IYW) and First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) (read: ETF Winners of the Latest Tech Rebound: Crypto Rules).
Clean Energy ETFs
There is a rising awareness of climate-change concerns as the latest reports from government officials highlight the gravity of the issue. Favorable government policies, impressive renewable investments, falling overall cost of generating renewable electricity and the growing adoption of electric vehicles (EVs) might keep supporting the momentum in the space in 2022. There’s no denying that U.S. President Joe Biden is seriously considering the threats behind climate change and is working toward his pledge to cut emissions to half by 2030.
From the perspective of the investment world, the attempts to highlight climate-change concerns can raise attention to clean energy funds that can gain from the rising initiatives to control adverse climate changes. In this regard, market participants can consider funds like iShares Global Clean Energy ETF (ICLN - Free Report) , Invesco Solar ETF (TAN - Free Report) , First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), ALPS Clean Energy ETF (ACES) and Invesco Global Clean Energy ETF (PBD) (read: 5 ETFs Under $20 to Add to Your Portfolio).
Banking ETFs
The current market environment can be highly beneficial to the banking sector in particular. This is because the rising rates will help boost profits for the banks. The steepening of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a chunk of the banks’ revenues, is likely to receive support from the steepening of the yield curve and a modest rise in loan demand.
The progress in coronavirus vaccine rollout presents a strong case,favoring a faster return to normalcy and economic recovery. As the economy starts operating in full swing, banks will be able to deliver an enhanced performance.
Investors can consider certain ETFs like SPDR S&P Regional Banking ETF (KRE - Free Report) , SPDR S&P Bank ETF (KBE - Free Report) , Invesco KBW Bank ETF (KBWB) and iShares U.S. Regional Banks ETF (IAT) (read: 4 ETFs to Ride on Fed's 50 Bps Rate Hike).