Wall Street has entered March on a shaky note as the Russia-Ukraine tensions and the resultant Western sanctions against Russia has heightened. Meanwhile, the Fed rate hike is highly likely though the expected move is already baked in on the current valuation. Inflation is running hot in developed economies and may creep higher due to worsening supply chain woes on the Ukraine issue.
Against this backdrop, below we highlight a few ETFs that could be tapped on March.
Amplify Inflation Fighter ETF ( IWIN Quick Quote IWIN - Free Report)
Supply chain disruptions are boosting inflation globally. With the Russia-Ukraine war, supply chain woes are sure to creep higher as both countries are huge producers of commodities ranging from agricultural, mineral and energy-based. the annual inflation rate in the United States accelerated to 7.5% in January of 2022, marking a new high since June of 1982, above market forecasts of 7.3%. We do not see the rising inflationary trend to subdue in the near term. So, one can play IWIN.
IWIN is an actively-managed ETF, investing in asset classes that look to benefit, either directly or indirectly, from inflation. The ETF hit the market on Feb 2, 2022. The portfolio includes an active mix of asset miners, commodities, land development, homebuilders, commodity REITs and real estate technology. The expense ratio of IWIN is 0.85%.
Legg Mason Low Volatility High Dividend ETF ( LVHD Quick Quote LVHD - Free Report)
The Fed is highly likely to hike rates in mid-March. Sky-high inflation emanating from labor shortage, supply chain disruptions as well as higher crude prices should make Fed members comfortable with several rate hikes in the coming days. As of Feb 28, 2022, CME’s FedWatch Tool said that there are 86.7% chances of a 25-bps rate hike in mid-March.
So, Russia, inflation and the Fed have power to trigger massive volatility in the market.
Legg Mason Low Volatility High Dividend ETF ( LVHD Quick Quote LVHD - Free Report) serves to the situation better as it offers low volatility as well dividend exposure. The fund, which provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility, yields 2.69% annually. Invesco DB US Dollar Index Bullish ETF (UUP)
The U.S. dollar is soaring amid the worsening conflict between Russia and Ukraine. Western sanctions have been mounting on Russia. Western powers blocked over the weekend several major Russian banks from using the global SWIFT payment system, which means missed payments and giant overdrafts, per Credit Suisse, as quoted on investing.com.
Such heightened crisis has boosted the safe-haven appeal of the U.S. dollar. Plus, the Fed rate hike should bolster the strength of the greenback. The ETF has a Zacks Rank #2 (Buy).
Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report)
Retail sales in the United States jumped 3.8% sequentially in January 2022 despite inflationary pressure, beating market forecast of a 2% rise.
Although the retail sales data aren’t adjusted for price changes, which makes the figures appear bigger, the report suggests consumer spending in the first quarter has been steady. As consumer spending makes up about 70% of U.S. GDP, the reading is suggestive of GDP growth too.
Ian Shepherdson, chief economist at Pantheon Macroeconomics now expects U.S. first-quarter consumption to be on its way to rise by about 5%, with GDP growth at about 4%, double their previous forecast, as quoted on Bloomberg.
Although we expect retail sales to slow down ahead on tough comparison, overall GDP growth should be steady. This should benefit the small-cap ETF VBR as these stocks focus more on domestic economy. Geopolitical tensions are also less likely to bother the segment (read:
6 Reasons to Buy Small-Cap ETFs Now). iShares U.S. Home Construction ETF ( ITB Quick Quote ITB - Free Report)
The housing market is entering into a better spell thanks to the key spring selling season. Normally, the season starts in March and lasts through May-June thanks to warmer weather after a chilly winter and buyers’ inclination to move to a new house before the next school calendar starts.
Experts believe that homebuyers approach the housing market this time with tax checks in their bank accounts and about 40% of home sales take place between April and July in the United States. This year, buyers will be trying to dip their toes into the housing market for as long as the rates remain affordable.