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ETF Areas That Investors Can Consider for May

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Wall Street has been mostly delivering a decent performance since the start of 2021. Investors continued to be upbeat about the U.S. economy’s recovery from the pandemic-induced slowdown. The story is expected to remain intact in May as well as investors continue to look for good opportunities to park their money in.

Investors can ignore the old Wall Street adage “sell in May and go away,” which points toward a period between May and October, when the market is generally observed to underperform the previous six months on average, per a CNBC article.

Meanwhile, several factors like earnings growth rate, profit margin stability, the future course of the Biden legislative strategies like American Jobs Plan and the American Families Plan, the Fed trimming of its $120 billion-a-month bond buying program and rate hikes along with the reopening of the economy and continued economic growth are believed to drive the stock market in the coming months (according to a CNBC article).

However, investors may have to worry about certain factors like increasing inflation levels, worries surrounding the Fed’s chances of cutting down the monetary stimulus earlier than expected along with growing chances of a tax hike in the coming months, per a CNBC article.

Against this backdrop, here are some ETF areas that investors can consider for May:

Clean Energy ETFs

Alternative energy includes any energy source that acts as a replacement to conventional and non-renewable fossil fuel. Notably, favorable government initiatives and federal policies, which include tax incentives to encourage installation, have accelerated global market growth for clean energy in 2020. Moreover, despite turbulences arising from the coronavirus pandemic, solar and wind energies have been dominating the global renewable space of late.

The space is expected to get stronger under the Biden administration. Biden is expected to talk about the climate emergency on global platforms and ensure that the United States achieves a 100% clean energy economy and net-zero emissions, no later than 2050. Going on, Biden’s climate and environmental justice proposal will make a federal investment of $1.7 trillion over the next 10 years, leveraging further private sector and state and local investments to stand at more than $5 trillion.

Thus, investors can consider the following ETFs -- iShares Global Clean Energy ETF (ICLN - Free Report) , Invesco Solar ETF (TAN - Free Report) , First Trust NASDAQ Clean Edge Green Energy ETF (QCLN) and ALPS Clean Energy ETF (ACES) (read: Playing the Clean Energy Market with ETFs).

Marijuana ETFs

The Biden administration is expected to decriminalize cannabis at a federal level in the United States. Toward this move, the U.S. House of Representatives passed legislation on Apr 19. The legislation would enable banks to provide services to cannabis companies in states where it is legal, according to verified sources. So far, 36 states have legalized medical cannabis while 17 states gave the green signal for adult use.

The bill explains that proceeds from legitimate cannabis businesses would not be considered illegal and directs federal regulators to formulate rules for how they would oversee such banking activities. Banks so far have been unwilling to get into business transactions with companies that are dealing in marijuana, dreading they could result in backlash from federal law and order. Thus, investors can consider The Cannabis ETF (THCX - Free Report) , ETFMG Alternative Harvest ETF (MJ - Free Report) , AdvisorShares Pure Cannabis ETF (YOLO) and Global X Cannabis ETF (POTX) (read: Cannabis On a Roll: Guide to ETF Investing).

Infrastructure ETFs

On Mar 31, Biden unveiled his $2.3-trillion infrastructure development plan that focuses on improving American infrastructure. The proposal includes funds for restoring roads and bridges, shoring up affordable housing, backing clean-energy projects and creating a nationwide broadband network. This will create millions of jobs, resulting in solid hiring in the coming months and benefit sectors like basic materials, industrials and utilities. Biden is expected to discuss the proposal at a joint session of Congress on Apr 28, according to a CNBC article.

Thus, against this backdrop, investors can consider Global X US Infrastructure Development ETF (PAVE - Free Report) and iShares U.S. Infrastructure ETF (IFRA - Free Report) (read: 4 ETFs to Buy in April to Tap Likely Market Rally).

Momentum ETFs

While the broader stock market is expected to gain on optimism surrounding a rebounding U.S. economy, positive developments in coronavirus vaccine research, second trench of coronavirus-aid package, an ultra-dovish monetary stance maintained by the Fed, record-low benchmark interest rate of 0-0.25% momentum investing will likely take centerstage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report) , Invesco DWA Momentum ETF (PDP - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO), VictoryShares USAA MSCI USA Value Momentum ETF (ULVM) and SPDR Russell 1000 Momentum Focus ETF (ONEO) (read: ETF Strategies to Play the US Market Optimism).

Material ETFs

The space is expected to remain strong as coronavirus vaccine rollout and introduction of another round of fiscal stimulus are pointing toward faster recovering economy. Moreover, as Biden aims at increasing the expenditures on infrastructure development, it can bode well for the materials space. Against this backdrop, investors can consider iShares U.S. Basic Materials ETF (IYM - Free Report) , The Materials Select Sector SPDR Fund (XLB - Free Report) , Vanguard Materials ETF (VAW) and Fidelity MSCI Materials Index ETF (FMAT) (read: 5 Undervalued Sector ETFs to Tap as Stocks Hit All-Time High).

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