The American economy grew an annualized 2% in Q3 of 2021, falling shy of market forecasts of 2.7% and slowing sharply from 6.7% in Q2. It is the weakest growth of pandemic recovery as government support is fading and a surge in Delta-variant related COVID-19 cases and global supply chain issues hurt consumption and production in the peroid.

Personal consumption eased sharply (1.7% versus 12% in Q2) as spending on goods shrank (led by a shortage of motor vehicles and parts due to supply chain disruptions). Consumption, the largest component of U.S. GDP making up about two-thirds of overall economic activity, decelerated to a 1.6% rate in the third quarter, also marking the weakest clip since the second quarter of 2020.

Also, nonresidential investment rose at a slower pace (1.8% vs 9.2%) and residential investment continued to fall (- 7.7% versus -11.7%). Meanwhile, net exports cut 1.14 percentage points from the growth as exports fell 2.5% (versus +7.6%) and imports surged 6.1% (versus 7.1%). Private inventories, however, contributed 2.07 percentage points to the growth.

Against this backdrop, we highlight a few ETF areas that could fetch investors some solid returns despite weak GDP data.

ETFs in Focus

Invesco QQQ (QQQ Quick QuoteQQQ - Free Report)

Weaker GDP data means a later-than-expected rise in interest rates in the United States. Wall Street and the investment world is abuzz with the bet that the Fed may announce QE tapering soon, citing economic growth and a rise in inflation. Though the rate hike timeframe has not been announced yet, weaker GDP data may push any kind of Fed policy tightening backward. This, in turn, would keep the rates at alower level and boost growth ETFs like QQQ. The fund has a Zacks Rank #2 (Buy).

iShares U.S. Home Construction ETF (ITB Quick QuoteITB - Free Report)

If rates remain low in the coming days, housing stocks should gain. Pending home sales declined 2.3% in September from August, according to the National Association of Realtors, as quoted on CNBC. Analysts had predicted a slight monthly gain. Increase in mortgage rates seemed to have disturbed the sales. Now, the GDP data may drag down treasury yields, which in turn, should benefit the rate-sensitive sectors like homebuilding. The fund has a Zacks Rank #2.

Health Care Select Sector SPDR ETF (XLV Quick QuoteXLV - Free Report)

Spending on healthcare rose 1.8% with expenditure on hospital and nursing home services rising 2.2%, Given the ongoing health crisis and surging demand for vaccines, booster shots and antiviral medicines, healthcare ETFs should be in fine fettle in the coming days. The fund has a Zacks Rank #1 (Strong Buy).

ETFMG Travel Tech ETF (AWAY Quick QuoteAWAY - Free Report)

The widespread availability of anti-viral pills and treatments for COVID-19, together with vaccines, would help the pandemic to see an end in the coming days. Already, the reopening trades are gaining steam. Travel and tourism stocks also benefitted after the Biden administration announced that travel restrictions for vaccinated foreigners would be eased. Many investors see value in the sector, which was hit hard by the Delta resurgence in summer.

Notably, spending increased 27.6% on air transportation and 5.1% on recreation services in Q3.  

Although rising fuel costs can act as a drag on the airlines’ sector, surging demand for travel may help airlines to pass on their increasing costs to travelers.

SPDR S&P Software & Services ETF (XSW Quick QuoteXSW - Free Report)

Intellectual property products saw a 3.1% increase in spending with software recording 3.4% gains in expenditure. Total revenues of software publishers witnessed a 4.4% surge while total revenues of computer systems design and related services registered a 2.5% increase. The fund has a Zacks Rank #2.