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After an astounding rally for a couple of months, Wall Street lost steam following reports that the second wave of coronavirus infection has emerged, raising questions about the speed of economic recovery (read: 5 ETFs for Protection From Market Crash).
According to Reuters, half of a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises of 40% or higher in new cases, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended Jun 7, on a rolling seven-day basis.
Additionally, the Federal Reserve painted a bleak picture of the economy for this year that made investors’ jittery. The central bank said that the impacts of the COVID-19 pandemic would last for the next couple of months and cautioned that some of the millions of jobs that have been lost during the viral outbreak may never return. It warned that the U.S. economy will contract by 6.5% in 2020 before rebounding 5% next year, and the unemployment rate will fall to 9.3% by the end of this year. Though the unemployment rate is down from 13.3% in May, it will be substantially above the 3.5% rate recorded in February — a near 50-year low.
However, a booming technology sector buoyed by a shift in consumer habits will continue to fuel growth in the market. Additionally, hopes of a potential coronavirus vaccine and an unprecedented stimulus from the central bank and the government will continue to drive the stocks higher. Notably, U.S. consumer sentiment climbed the most in June since 2016 as more states began to reopen their economies and employers got back their jobs. The University of Michigan's consumer-sentiment index spiked more than 9% to 78.9 in June from 72.3 in May, according to preliminary data. It marks the second consecutive monthly gain after a record slump in April (read: Missed the Big Five Tech Rally? Buy the Dip With These ETFs).
Given the sharp decline in the stock market last week, investors should take advantage of the beaten-down prices. For them, we have highlighted five solid ETF picks that were in red over the past month but have a solid upside potential. All these have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
This fund offers equal-weight exposure to 89 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 73.4% share while diversified banks, thrifts & mortgage finance, other diversified financial services, and asset management & custody banks take the remainder. It has amassed $1.4 billion in its asset base while trading in heavy volume of 2.9 million shares a day on average. The product charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: Sector Rotation: Investors Flocking to Cyclical ETFs).
This fund offers exposure to the small-cap segment by tracking the S&P SmallCap 600 Index, holding 629 stocks in its basket. It is widely diversified across sectors with industrials, consumer discretionary, financials, information technology and healthcare making up for double-digit exposure each. IJH is the popular ETF with AUM of $39 billion and trades in average daily volume of 6.5 million shares. It charges investors 7 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
XAR offers equal-weight exposure to 34 companies in the aerospace & defense segment. It follows the S&P Aerospace & Defense Select Industry Index, charging 35 bps in annual fees from investors. The fund has been able to manage $1.4 billion in its asset base and trades in average daily volume of 275,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares U.S. Insurance ETF (IAK - Free Report) – Down 9.1%
With AUM of $63.5 million, this product provides exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 62 securities in its basket. From an industrial exposure look, property & casualty insurance accounts for the largest share at 53.4%, while life & health insurance and multiline insurance round off the top three spots with double-digit exposure each. The fund charges 43 bps in annual fees and trades in average daily volume of 11,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
This is the most-popular ETF in the mid-cap space with AUM of $42 billion and average daily volume of 2.1 million shares. It tracks the S&P MidCap 400 Index and holds 400 stocks in its basket. Information technology, industrials, financials, consumer discretionary and healthcare are the top five sectors with double-digit exposure each. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
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Top-Ranked Beaten Down ETFs to Buy Now
After an astounding rally for a couple of months, Wall Street lost steam following reports that the second wave of coronavirus infection has emerged, raising questions about the speed of economic recovery (read: 5 ETFs for Protection From Market Crash).
According to Reuters, half of a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises of 40% or higher in new cases, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended Jun 7, on a rolling seven-day basis.
Additionally, the Federal Reserve painted a bleak picture of the economy for this year that made investors’ jittery. The central bank said that the impacts of the COVID-19 pandemic would last for the next couple of months and cautioned that some of the millions of jobs that have been lost during the viral outbreak may never return. It warned that the U.S. economy will contract by 6.5% in 2020 before rebounding 5% next year, and the unemployment rate will fall to 9.3% by the end of this year. Though the unemployment rate is down from 13.3% in May, it will be substantially above the 3.5% rate recorded in February — a near 50-year low.
However, a booming technology sector buoyed by a shift in consumer habits will continue to fuel growth in the market. Additionally, hopes of a potential coronavirus vaccine and an unprecedented stimulus from the central bank and the government will continue to drive the stocks higher. Notably, U.S. consumer sentiment climbed the most in June since 2016 as more states began to reopen their economies and employers got back their jobs. The University of Michigan's consumer-sentiment index spiked more than 9% to 78.9 in June from 72.3 in May, according to preliminary data. It marks the second consecutive monthly gain after a record slump in April (read: Missed the Big Five Tech Rally? Buy the Dip With These ETFs).
Given the sharp decline in the stock market last week, investors should take advantage of the beaten-down prices. For them, we have highlighted five solid ETF picks that were in red over the past month but have a solid upside potential. All these have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
SPDR S&P Bank ETF (KBE - Free Report) – Down 10.8%
This fund offers equal-weight exposure to 89 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 73.4% share while diversified banks, thrifts & mortgage finance, other diversified financial services, and asset management & custody banks take the remainder. It has amassed $1.4 billion in its asset base while trading in heavy volume of 2.9 million shares a day on average. The product charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: Sector Rotation: Investors Flocking to Cyclical ETFs).
iShares Core S&P Small-Cap ETF (IJR - Free Report) – Down 9.6%
This fund offers exposure to the small-cap segment by tracking the S&P SmallCap 600 Index, holding 629 stocks in its basket. It is widely diversified across sectors with industrials, consumer discretionary, financials, information technology and healthcare making up for double-digit exposure each. IJH is the popular ETF with AUM of $39 billion and trades in average daily volume of 6.5 million shares. It charges investors 7 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
SPDR S&P Aerospace & Defense ETF (XAR - Free Report) – Down 9.2%
XAR offers equal-weight exposure to 34 companies in the aerospace & defense segment. It follows the S&P Aerospace & Defense Select Industry Index, charging 35 bps in annual fees from investors. The fund has been able to manage $1.4 billion in its asset base and trades in average daily volume of 275,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares U.S. Insurance ETF (IAK - Free Report) – Down 9.1%
With AUM of $63.5 million, this product provides exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 62 securities in its basket. From an industrial exposure look, property & casualty insurance accounts for the largest share at 53.4%, while life & health insurance and multiline insurance round off the top three spots with double-digit exposure each. The fund charges 43 bps in annual fees and trades in average daily volume of 11,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Core S&P Mid-Cap ETF (IJH - Free Report) - Down 7.8%
This is the most-popular ETF in the mid-cap space with AUM of $42 billion and average daily volume of 2.1 million shares. It tracks the S&P MidCap 400 Index and holds 400 stocks in its basket. Information technology, industrials, financials, consumer discretionary and healthcare are the top five sectors with double-digit exposure each. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>