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Buy the Dip With These Top-Ranked ETFs

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Wall Street ended on a negative note last week and the week before that, strengthening the worth of the adage that September is historically the worst month of the year for stocks. The S&P 500, the Dow Jones and the Nasdaq Composite lost about 0.6%, 0.07% and 0.5%, respectively. The S&P 500 is on its way toward its first monthly decline since January. The Russell 2000 added only 0.42% last week.

This week seems to be no different as of now. The S&P 500 started the week posting its worst daily performance since May 12, per CNBC. Each of the 11 sectors of the benchmark recorded losses to start the week. While investors are concerned about the ripple effects of the China’s property market bubble, Fed taper talks, President Biden’s tax hike proposal and rising Covid-19 cases, there are silver linings too.

Last week was not extremely downbeat on every ground as the retail sales bounced back. This is especially true given the fact we are entering the all-important holiday season. JPMorgan’s trading guru Kolanovic says market sell-off is ‘technical’ and represents a buying opportunity.  The recent selloff should not be feared tremendously as September is historically a down month for Wall Street (read: August Retail Sales Shine: ETFs & Stocks to Win).

According to moneychimp.com, a consensus carried out from 1950 to 2020 has revealed that September ended up offering positive returns in 32 years and negative returns in 39 years, with an average return of negative 0.62%, which is worse than any other month.

So why not overlook the gloom and look at the upcoming bloom in the holiday season?

Holiday Season to Step In

The October-December period embraces the key holiday season, which puts the spotlight on the performance of retailers. As loads of sales-boosting events — Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas — fall in this quartile, the sector generally sees a sales boost.

According to Mastercard SpendingPulse, U.S. retail sales (excluding automotive and gas) for the “75 Days of Christmas” that will run from Oct 11-Dec 24 are expected to rise 6.8% from the year-ago period. e-Commerce sales are likely to grow by 7.5% compared to the same time period last year.

Thanks to the pent-up savings and government stimulus, consumers seem to be willing to spend. Over the last six months, the Luxury retail and Jewelry sectors have been experiencing some of the strongest year-over-year growth.

Fourth-Quarter Is Best For Wall Street

The S&P 500 rises about 4.3% in the fourth quarter, per Barron’s, making it the best quarter of the year. “Over the past three decades back to 1989, the Dow (4.3%), S&P (3.6%) and Nasdaq (4.7%) all show gains in the fourth quarter, according to Kensho, and trade positive 75%–80% of the time,” per a CNBC article.

4 ETFs to Buy

In this light, we highlight a few ETFs that could be great picks for the fourth quarter. Investors should use the current dip in the market as the buying opportunity.

SPDR S&P Retail ETF (XRT - Free Report)

Though the economy is not in good shape, easy money policy and vaccine distribution is a hope for retailers. This should favor retail stocks and ETFs. The ETF has a Zacks Rank #1 (Strong Buy).

First Trust NASDAQ Clean Edge Green Energy ETF (QCLN - Free Report)

This Zacks Rank #2 (Buy) fund should gain on President Biden’s proposal to boost clean energy initiative. House of Representatives Democrats recently unveiled details on a proposed $150 billion payment program aimed at eliminating greenhouse gas emissions out of the electricity sector.

Invesco Dynamic Semiconductors ETF (PSI - Free Report)

The semiconductor segment of the broad U.S. stock market has been an area to watch lately, given the surge in all types of chips demand amid a global shortage.Notably, the stay-at-home trend due to the coronavirus pandemic has bolstered demand for gaming chips and data center business.The fund has a Zacks Rank #1 (read: Semiconductor ETFs Soaring to New Heights).

Communication Services Select Sector SPDR ETF (XLC - Free Report)

The underlying Communication Services Select Sector Index seeks to provide an effective representation of the communication services sector of the S&P 500 Index. Communication companies like Facebook, Alphabet, AT&T and Verizon should be in high demand irrespective of the economic conditions due to their sheer necessities in today’s world. Moreover, these tech and communication companies are apparently resistant to inflation. The fund has a Zacks Rank #1 (read: 3 Solid Reasons to Bet on Big Tech ETFs and Stocks).