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ETFs to Play Reopening Trade as New US COVID-19 Cases Drop

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Wall Street started June with optimism surrounding the reopening of the U.S. economy. Despite being worried about inflation and price pressure, investors played the reopening trade on Jun 1. Travel and hospitality, energy, materials and financials were the spaces that saw gains. American Airlines and United Airlines were up 1.7% and 2.2%, respectively, on the day. Cruise operators Carnival Corporation and Norwegian Cruise Line Holdings also climbed 2% and 2.7%, respectively, on Jun 1.

Accelerated coronavirus vaccine rollout has been the major factor that helped gain control over the aggravating outbreak. According to the Centers for Disease Control and Prevention data, more than half the U.S. population has been administered at least one dose of a COVID-19 vaccination, per a CNBC article.

Notably, President Joe Biden recently announced his latest vaccination goals. He aims at administering at least one dose of a coronavirus vaccine to 70% of U.S. adults along with getting 160 million adults completely vaccinated by Jul 4, per a CNBC article.

The decline in the number of coronavirus cases has increased optimism among market participants toward faster recovering and reopening of the U.S. economy. An increasing number of people are expected to travel and go for vacations starting from Memorial Day weekend, which is also considered to be the unofficial beginning of the summer travel season, according to the same CNBC article.

In fact, the Transportation Security Administration has informed about screening an average of 1.78 million people from May 28 through May 31, significantly above the year-ago volumes, per a CNBC article. The data highlights U.S. air travel touching a pandemic-era high. However, these volumes are still 22% below 2019’s Memorial Day weekend, according to the same CNBC article.

However, investors will be eagerly waiting for the Federal Reserve’s FOMC meeting scheduled for Jun 15-16. They may have to worry about certain factors like increasing inflation levels, tensions surrounding the Fed’s chances of trimming the monetary stimulus earlier than expected and brewing possibilities of a tax hike in the coming months, per a CNBC article.

ETFs to Ride the Reopening Optimism

Against this backdrop, let’s look at the following ETFs that are well-poised to gain as the reopening of U.S. economy picks up pace:

United States Oil Fund (USO - Free Report)

The United States Oil Fund’s investment objective is for the daily changes, in percentage terms, of its shares’ net asset value (NAV) to reflect the daily changes, in percentage terms, of the spot price of light, sweet crude oil delivered to Cushing, OK, as measured by the daily changes in the Benchmark Oil Futures Contract. It has total expense ratio of 0.83% (read: ETFs to Play the Reopening US Economy Optimism).

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)

The increase in direct payments to Americans comes as a ray of hope for players in the consumer discretionary sector, which attracts a major portion of consumer spending. The fund intends to provide investment results that before expenses correspond generally with the price and yield performance of the MSCI USA IMI Consumer Discretionary Index. It charges investors 8 basis points (bps) in annual fees as stated in the prospectus (read: Will ETFs Gain on Starbucks' Q2 Earnings Beat Amid Pandemic?).

The Industrial Select Sector SPDR Fund (XLI - Free Report)

The industrial sector, which faced disruption in global supply chains and factory closedowns, is expected to rebound on recovery from the coronavirus-led slump. The re-opening of the U.S. economy, accelerated coronavirus vaccine rollout and addition of stimulus are expected to drive demand and economic activities in the sector. The fund seeks to provide investment results that before expenses correspond generally to the price and yield performance of the Industrial Select Sector Index. It has an expense ratio of 12 bps (read: ETFs to Gain as US Industrial Output Rises in April).

Vanguard S&P Small-Cap 600 ETF (VIOO - Free Report)

Small-cap stocks, as indicated by the Russell 2000 Index, have been outperforming the broader market and hitting new all-time highs. This upside is being largely led by small-cap companies that are closely tied to the U.S. economy and thus are well-positioned to outperform when the economy improves. VIOO seeks to track the performance of the S&P Small-Cap 600 Index. It has an expense ratio of 0.10%.

U.S. Global Jets ETF (JETS - Free Report)

Studying the stressed balance sheets of the carriers, it will be safe to say that the space is likely to get huge support from the reopening of the U.S. economy. JETS provides investors access to the global airline industry, including airline operators and manufacturers across the world. The fund has an expense ratio of 0.60% (read: Brent Tops $70 Again: ETFs Set to Win & Lose).

ETFMG Travel Tech ETF (AWAY - Free Report)

The travel industry will be getting the much-needed boost from the reopening of the U.S. economy, accelerated coronavirus vaccine rollout initiatives and introduction of another round of fiscal stimulus. This fund is the first ETF to focus on technology-focused global travel and tourism companies. It charges an expense ratio of 0.75% (read: 5 ETFs Set to Soar on Strong Memorial Day Travel Rebound).

Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)

This fund tracks the Dynamic Leisure & Entertainment Intellidex Index and holds a small basket of 32 stocks. PEJ charges 63 bps in annual fees.

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