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The month of August started off on a decent note for Wall Street with the Fed reiterating its dovish stance and the spread of the Delta version of the COVID-19 coming to the forefront. On a different note, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. This was yet another concern.
Though the ongoing earnings season has been stellar, a number of companies have disappointed on current-quarter guidance, offering a more tepid outlook. In fact, a consensus carried out from 1950 to 2020 shows that August ended up offering positive stock returns in 39 years and negative returns in 32 years, per moneychimp.com, with an average return of negative 0.16%.
If history is any guide, the month can easily be touted as subdued. Against this historical market performance, let’s take a look at the ETFs that can come across as intriguing bets for the month.Having said this, we would like to note that equity investors have entered August with momentum from a sixth straight monthly gain.
As per Equityclock, healthcare enjoys seasonal strength in August. This sector is less ruffled by economic fluctuations due to its non-cyclical nature. The sector provides a defensive tilt to the fund’s portfolio in a volatile market. COVID-19 outbreak and the need for vaccine and treatment have helped the sector even more. Also, decent earnings, rising M&A, IPO and a positive regulatory backdrop should help the fund.
In a bid to safety, a look at dividend-focused quality ETFs makes sense. The fund SCHD measures the performance of high dividend-yielding U.S. stocks that have a record of consistently paying dividends. Wells Fargo, Cintas, and Hershey were among the many large U.S. companies that have raised dividends lately, per a barrons.com article. Other renowned companies that announced dividend hikes lately were Truist Financial, Mondelez International, McKesson, Marathon Oil, Principal Financial Group, Ball, Skyworks Solutions and Republic Services.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)
The dovish Fed statements dragged down the treasury yields recently, which should benefit tech stocks as these are high-growth in nature. Moreover, fears of the Delta variant of COVID-19 are also pushing up demand for the tech stocks as these are the winning ones during the stay-at-home trend. Plus, the sector has solid long-term potential. If this was not enough TDIV yields 1.82% currently, which is higher than the benchmark U.S. treasury yield (1.24% as of Jul 30, 2021).
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report)
Palladium has been seeing strong demand in the manufacture of industrial products. The metal is used for catalytic converters in gasoline-powered cars. Meanwhile, the markets have been long grappling with the supply crunch of palladium. A relatively subdued U.S. dollar is an added tailwind.
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN - Free Report)
Clean energy seems to be an emerging space. “Growing consumer electric vehicle adoption, state expansions of charging infrastructure, falling battery prices and increased solar-storage installations” have acted as a tailwind for the U.S. clean energy sector over the past few quarters. Clean energy ETFs were beaten down at the start of the year, which calls for lucrative valuation now.
Semiconductor stocks and ETFs should gain ahead from a number of areas like the soaring video gaming industry, the latest bounce-back in bitcoin and an all overall pickup in technology stocks amid the pandemic. Supply shortage of semiconductors also boosted the demand for chips.
U.S. treasury yields have slid to as low as 1.24% as of Jul 30, 2021. This has been a boon to the U.S. real estate sector. The cost of living in the United States has surged the most in 13 years. In a rising inflation environment, real estate stocks act as a good bet. The U.S. homebuilding sector is on fire. But higher demand for home buying as well as lack of labor and land boosted home prices. This is a great scenario for renters. Plus, a stupendous tech rally has been aiding the data center REITs in recent times (read: 5 Reasons Why REIT ETFs Are Surging).
Invesco Water Resources ETF PHO is up 22.2% this year and has gained 35.1% in the past year. Still, water ETFs are often ignored by investors. Water scarcity has become a global crisis. Then there is President Biden’s infrastructure deal. According to the White House, the infrastructure deal will include $579 billion in new spending. Going by a CNBC article, the proposal will allocate $55 billion to water (read: Often-Ignored Water ETFs Are Sizzling Hot: Here's Why).
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8 ETFs to Buy in Historically Low August
The month of August started off on a decent note for Wall Street with the Fed reiterating its dovish stance and the spread of the Delta version of the COVID-19 coming to the forefront. On a different note, the U.S. GDP grew at a 6.5% annualized rate in the second quarter of 2021, per the Commerce Department’s first estimate (as mentioned in a CNBC article). However, the metric lagged the Dow Jones estimate of 8.4%. This was yet another concern.
Though the ongoing earnings season has been stellar, a number of companies have disappointed on current-quarter guidance, offering a more tepid outlook. In fact, a consensus carried out from 1950 to 2020 shows that August ended up offering positive stock returns in 39 years and negative returns in 32 years, per moneychimp.com, with an average return of negative 0.16%.
If history is any guide, the month can easily be touted as subdued. Against this historical market performance, let’s take a look at the ETFs that can come across as intriguing bets for the month.Having said this, we would like to note that equity investors have entered August with momentum from a sixth straight monthly gain.
Healthcare ETF Vanguard (VHT - Free Report)
As per Equityclock, healthcare enjoys seasonal strength in August. This sector is less ruffled by economic fluctuations due to its non-cyclical nature. The sector provides a defensive tilt to the fund’s portfolio in a volatile market. COVID-19 outbreak and the need for vaccine and treatment have helped the sector even more. Also, decent earnings, rising M&A, IPO and a positive regulatory backdrop should help the fund.
Schwab U.S. Dividend Equity ETF (SCHD - Free Report)
In a bid to safety, a look at dividend-focused quality ETFs makes sense. The fund SCHD measures the performance of high dividend-yielding U.S. stocks that have a record of consistently paying dividends. Wells Fargo, Cintas, and Hershey were among the many large U.S. companies that have raised dividends lately, per a barrons.com article. Other renowned companies that announced dividend hikes lately were Truist Financial, Mondelez International, McKesson, Marathon Oil, Principal Financial Group, Ball, Skyworks Solutions and Republic Services.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)
The dovish Fed statements dragged down the treasury yields recently, which should benefit tech stocks as these are high-growth in nature. Moreover, fears of the Delta variant of COVID-19 are also pushing up demand for the tech stocks as these are the winning ones during the stay-at-home trend. Plus, the sector has solid long-term potential. If this was not enough TDIV yields 1.82% currently, which is higher than the benchmark U.S. treasury yield (1.24% as of Jul 30, 2021).
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report)
Palladium has been seeing strong demand in the manufacture of industrial products. The metal is used for catalytic converters in gasoline-powered cars. Meanwhile, the markets have been long grappling with the supply crunch of palladium. A relatively subdued U.S. dollar is an added tailwind.
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN - Free Report)
Clean energy seems to be an emerging space. “Growing consumer electric vehicle adoption, state expansions of charging infrastructure, falling battery prices and increased solar-storage installations” have acted as a tailwind for the U.S. clean energy sector over the past few quarters. Clean energy ETFs were beaten down at the start of the year, which calls for lucrative valuation now.
VanEck Vectors Semiconductor ETF (SMH - Free Report)
Semiconductor stocks and ETFs should gain ahead from a number of areas like the soaring video gaming industry, the latest bounce-back in bitcoin and an all overall pickup in technology stocks amid the pandemic. Supply shortage of semiconductors also boosted the demand for chips.
iShares Cohen & Steers REIT ETF (ICF - Free Report)
U.S. treasury yields have slid to as low as 1.24% as of Jul 30, 2021. This has been a boon to the U.S. real estate sector. The cost of living in the United States has surged the most in 13 years. In a rising inflation environment, real estate stocks act as a good bet. The U.S. homebuilding sector is on fire. But higher demand for home buying as well as lack of labor and land boosted home prices. This is a great scenario for renters. Plus, a stupendous tech rally has been aiding the data center REITs in recent times (read: 5 Reasons Why REIT ETFs Are Surging).
Water Resources Invesco ETF (PHO - Free Report)
Invesco Water Resources ETF PHO is up 22.2% this year and has gained 35.1% in the past year. Still, water ETFs are often ignored by investors. Water scarcity has become a global crisis. Then there is President Biden’s infrastructure deal. According to the White House, the infrastructure deal will include $579 billion in new spending. Going by a CNBC article, the proposal will allocate $55 billion to water (read: Often-Ignored Water ETFs Are Sizzling Hot: Here's Why).