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February is not known for good stock returns. A consensus carried out from 1950 to 2022 shows that February ended up offering positive stock returns in 41 years and negative returns in 32 years, per moneychimp.com, with an average negative return of 0.14%.
Global economies and corporates will leave no stone unturned to register a fast rebound from the policy-tightening-induced economic slowdown. But rising rate worries in the globe is here to stay this year, though at a lower magnitude.
As expected, the Federal Reserve on Wednesday hiked its benchmark interest rate by 25 bps and gave indication that more rate hikes are in the cards as inflation remains high though is showing signs of cooling. The latest hike takes it to a target range of 4.5%-4.75%, the highest since October 2007. The move also marked the eighth increase in rates since March 2022.
Key tech earnings came more-or-less decent. Apple, Alphabet & Microsoft underperformed while Meta and Netflix Outperformed. Amazon, though beat overall but provided light guidance. Meanwhile, geopolitical tensions are rife with the Russia-Ukraine war showing no signs of ending.
Still, risk-on sentiments returned to the market this year on a less-hawkish Fed. Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
The underlying FTSE High Dividend Yield Index consists of common stocks of companies paying out dividends that are generally higher than average. Dividend stocks often beat their non-dividend paying counterparts amid market uncertainty. Stocks with high dividend point to quality investing — a pre-requisite to making money in a volatile environment. Even if there is capital loss, dividend payments make up for it to a large extent. This Zacks Rank #1 (Strong Buy) VYM offers a decent 2.94% yield annually.
While the U.S. economy has faced steep Fed rate hikes from the beginning of last year, several other developed economies are still practicing moderately low-rate policies. Inflation profile too is upbeat in the international front.
The IMF sees growth in emerging market and developing economies at 4.0% in 2023, 0.3 percentage point higher than its October projection, and 0.1 percentage point higher than the 3.9% estimate for 2022. That’s way higher than the estimates for the United States at 1.4%, up from 1.0% predicted in October and following 2.0% growth in 2022.
While Euro zone growth forecast for 2023 is lower at 0.7%, the stocks there have seen the best ever start to a year. European equities jumped 10% in January. Lower energy prices, signs of cooling inflation and China’s reopening have boosted sentiment.
Small-Cap Value – Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report)
Things are taking a turn for the better for the pint-sized stocks. Upbeat earnings and cheaper valuation augur well for the pint-sized stocks. Since the small-caps are more domestically-focused and do not have much foreign exposure, these are faring better on releases of decent U.S. economic indicators. The fund has a Zacks ETF Rank #1. The fund charges 15 bps in fees.
The year 2023 has marked the return of tech stocks as rates started falling on bets of Fed slowdown. The ETF CIBR tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. Data breaches are rife amid the emerging trend of digitization.
The ongoing Russia-Ukraine war and chances of cyber-attacks is a threat. Cyber insurance premium gains have been most notable lately indicating the segment’s demand. Cyber insurance pricing increased 48% in the third quarter of 2022 compared with 79% in the prior quarter. Moreover, cybersecurity players emerge as lucrative acquisition target as 2022’s market crash lowered their valuation.
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4 ETFs to Fall for This February
February is not known for good stock returns. A consensus carried out from 1950 to 2022 shows that February ended up offering positive stock returns in 41 years and negative returns in 32 years, per moneychimp.com, with an average negative return of 0.14%.
Global economies and corporates will leave no stone unturned to register a fast rebound from the policy-tightening-induced economic slowdown. But rising rate worries in the globe is here to stay this year, though at a lower magnitude.
As expected, the Federal Reserve on Wednesday hiked its benchmark interest rate by 25 bps and gave indication that more rate hikes are in the cards as inflation remains high though is showing signs of cooling. The latest hike takes it to a target range of 4.5%-4.75%, the highest since October 2007. The move also marked the eighth increase in rates since March 2022.
Key tech earnings came more-or-less decent. Apple, Alphabet & Microsoft underperformed while Meta and Netflix Outperformed. Amazon, though beat overall but provided light guidance. Meanwhile, geopolitical tensions are rife with the Russia-Ukraine war showing no signs of ending.
Still, risk-on sentiments returned to the market this year on a less-hawkish Fed. Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
Dividend – Vanguard High Dividend Yield ETF (VYM - Free Report)
The underlying FTSE High Dividend Yield Index consists of common stocks of companies paying out dividends that are generally higher than average. Dividend stocks often beat their non-dividend paying counterparts amid market uncertainty. Stocks with high dividend point to quality investing — a pre-requisite to making money in a volatile environment. Even if there is capital loss, dividend payments make up for it to a large extent. This Zacks Rank #1 (Strong Buy) VYM offers a decent 2.94% yield annually.
International – Vanguard FTSE All-World Ex-US ETF (VEU - Free Report)
While the U.S. economy has faced steep Fed rate hikes from the beginning of last year, several other developed economies are still practicing moderately low-rate policies. Inflation profile too is upbeat in the international front.
The IMF sees growth in emerging market and developing economies at 4.0% in 2023, 0.3 percentage point higher than its October projection, and 0.1 percentage point higher than the 3.9% estimate for 2022. That’s way higher than the estimates for the United States at 1.4%, up from 1.0% predicted in October and following 2.0% growth in 2022.
While Euro zone growth forecast for 2023 is lower at 0.7%, the stocks there have seen the best ever start to a year. European equities jumped 10% in January. Lower energy prices, signs of cooling inflation and China’s reopening have boosted sentiment.
Small-Cap Value – Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report)
Things are taking a turn for the better for the pint-sized stocks. Upbeat earnings and cheaper valuation augur well for the pint-sized stocks. Since the small-caps are more domestically-focused and do not have much foreign exposure, these are faring better on releases of decent U.S. economic indicators. The fund has a Zacks ETF Rank #1. The fund charges 15 bps in fees.
Cyber Security – First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report)
The year 2023 has marked the return of tech stocks as rates started falling on bets of Fed slowdown. The ETF CIBR tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. Data breaches are rife amid the emerging trend of digitization.
The ongoing Russia-Ukraine war and chances of cyber-attacks is a threat. Cyber insurance premium gains have been most notable lately indicating the segment’s demand. Cyber insurance pricing increased 48% in the third quarter of 2022 compared with 79% in the prior quarter. Moreover, cybersecurity players emerge as lucrative acquisition target as 2022’s market crash lowered their valuation.