The U.S. economy grew an annualized 6.9% in the fourth quarter of 2021, breezing past expectations of 5.5%, following a 2.3% uptick in the previous three-month period. For full-year 2021, the economy advanced 5.7% (versus a 3.4% decline in Q4), the highest since 1984, per tradingeconomics.
Consumer spending, which accounts for more than two-thirds of U.S. GDP, rose 3.3% thanks to a 4.7% surge in services spending, namely health care, recreation, and transportation. Fixed investment bounced back 1.3%, driven by intellectual property products.
Residential investment, however, continued to decline and was down 0.8%. Net trade also failed to contribute meaningfully to growth. Exports jumped 24.5% led by consumer goods, industrial supplies, foods, and travel and imports rose 17.7%.
Against this backdrop, we highlight a few ETF areas that could fetch investors some solid returns.
Retail – SPDR S&P Retail ETF ( XRT Quick Quote XRT - Free Report) – Zacks Rank #1 (Strong Buy)
Consumers are shelling out more than the previous periods as the personal saving rate fell to 7.4% in the fourth quarter from 9.5% in the third quarter. The increase in personal consumption expenditure reflected increases in both goods and services.
Within goods, the meaningful contributions came from clothing and footwear, games and toys and recreational goods as well as vehicles. This ensures a rally in retail stocks and ETFs in the coming days.
XRT has invested about 20% and 18% in apparel and automotive stocks, respectively. Drug retail takes about 2% of the fund while specialty stores account for about 16.6% of XRT.
Restaurants – AdvisorShares Restaurant ETF ( EATZ Quick Quote EATZ - Free Report)
Within services, the leading contributors were food services and accommodations. The widespread availability of anti-viral pills and treatments for COVID-19, together with vaccines, are helping consumers to step out.
The food-away-from-home price index 6.0% year over year in 2021, the highest increase since January 1982. This points to the fact that restaurants are charging higher. Hence, this pureplay restaurant ETF EATZ could be a way to benefit.
Healthcare – Health Care Select Sector SPDR ETF ( XLV Quick Quote XLV - Free Report) – Zacks Rank #1
Within the services, healthcare sector’s contribution to percent change in real GDP was 0.79% in Q4, up from 0.59% seen in Q3. The medical care price index rose 0.3% sequentially in December. The index for hospital services increased 0.2% and the index for prescription drugs rose 0.1%.
And why not? As long as COVID-19 fears are around, demand for therapies and vaccines will remain strong. Plus, the sector is non-cyclical in nature and hence is a great bet amid the ongoing uncertainty.
Software – SPDR S&P Software & Services ETF ( XSW Quick Quote XSW - Free Report) – Zacks Rank #2
Though rising rate worries are casting a pall over the tech space, software looks to be a good long-term bet. Intellectual property sector’s contribution to percent change in real GDP was 0.53% in Q4, up from 0.46% seen in Q3. Software contributed 0.27% to GDP in Q4 versus 0.20% in Q3.
Auto – First Trust S-Network Future Vehicles & Technology ETF ( CARZ Quick Quote CARZ - Free Report) – Zacks Rank #3 (Hold)
Motor vehicle output
increased 29.7% in Q4 versus 38.4% decline in Q3. Motor vehicle output gains in 2021 was 7.4% versus 12.7% fall noticed in 2020. The price index for new vehicles also continued to rise, increasing 1.0% in December, marking its eighth successive monthly rise of at least 1.0%. Although the latest rising rate worries and chip crunch are drags, the latest data suggest that it could be the beginning of a rebound in the auto industry.