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Wall Street is seeing tumultuous trading this year, with the major bourses in deep red so far. A war in Ukraine coupled with Fed rate hike bets and inflationary pressures has led to huge volatility and uncertainty in the stock market. Notably, the S&P 500 is down 10.6% year to date.
According to John Hancock Investment Management Co-Chief Investment Strategist Emily Roland, U.S. stocks are currently on sale, compelling investors to buy on the dip. As such, we have highlighted five ETFs from different zones that have plunged the most this year but have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
These products, namely, WisdomTree Cloud Computing Fund (WCLD - Free Report) , SPDR S&P Biotech ETF (XBI - Free Report) , iShares Expanded Tech-Software Sector ETF (IGV - Free Report) , iShares U.S. Home Construction ETF (ITB - Free Report) and iShares Russell Mid-Cap Growth ETF (IWP - Free Report) , are poised to outperform in the coming weeks when the market resumes its uptrend.
Inside the Bull Thesis
The S&P 500 is attractively valued at the current levels. This is especially true as the index is currently trading with a P/E ratio of 24.31 versus 26.08 at the start of the year and 35.96 at the start of 2021. This makes the stocks tempting to investors.
Though the abrupt rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown, consumer spending remains strong given the elevated wage growth and lower unemployment rate.
The Fed is expected to raise interest rates by 25 bps in the FOMC meeting. Powell is betting that the economy can withstand modestly higher borrowing costs with a low unemployment rate and solid consumer spending. The initial phase of the rate increase will be good for stocks as it will reflect an improving economy. On the other hand, Ukraine and Russia are in peace talks, which seems more realistic now. The agreement will end the war, giving a boost to the stocks (read: 4 Sector ETFs to Win From Fed Rate Hike).
We have highlighted the ETFs in detail below:
WisdomTree Cloud Computing Fund (WCLD - Free Report) – Down 33.3%
WisdomTree Cloud Computing Fund offers exposure to emerging and fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 76 stocks in its basket and charges investors 45 bps in fees per year.
iShares Expanded Tech-Software Sector ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 127 securities.
iShares Expanded Tech-Software Sector ETF is popular with AUM of $5.9 billion. Volume is good as it exchanges 1.8 million shares a day. The product charges 43 bps in annual fees and has a Zacks ETF Rank #2.
iShares U.S. Home Construction ETF (ITB - Free Report) – Down 21.8%
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2 billion, it holds a basket of 46 stocks with heavy concentration on the top two firms.
iShares U.S. Home Construction ETF charges 41 bps in annual fees and trades in a heavy volume of around 5 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #2 (read: Housing ETFs Likely to Spring Up in the Key Selling Season).
iShares Russell Mid-Cap Growth ETF (IWP - Free Report) – Down 20.4%
With AUM of $12.5 billion, iShares Russell Mid-Cap Growth ETF offers exposure to mid-sized U.S. companies whose earnings are expected to grow at an above-average rate relative to the market by tracking the Russell MidCap Growth Index. It holds 389 securities in its basket, with none accounting for more than 1.6% of the total assets.
iShares Russell Mid-Cap Growth ETF charges 23 bps in annual fees and trades in an average daily volume of 1.3 million shares. The product has a Zacks ETF Rank #2.
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5 Top-Ranked ETFs on Sale
Wall Street is seeing tumultuous trading this year, with the major bourses in deep red so far. A war in Ukraine coupled with Fed rate hike bets and inflationary pressures has led to huge volatility and uncertainty in the stock market. Notably, the S&P 500 is down 10.6% year to date.
According to John Hancock Investment Management Co-Chief Investment Strategist Emily Roland, U.S. stocks are currently on sale, compelling investors to buy on the dip. As such, we have highlighted five ETFs from different zones that have plunged the most this year but have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
These products, namely, WisdomTree Cloud Computing Fund (WCLD - Free Report) , SPDR S&P Biotech ETF (XBI - Free Report) , iShares Expanded Tech-Software Sector ETF (IGV - Free Report) , iShares U.S. Home Construction ETF (ITB - Free Report) and iShares Russell Mid-Cap Growth ETF (IWP - Free Report) , are poised to outperform in the coming weeks when the market resumes its uptrend.
Inside the Bull Thesis
The S&P 500 is attractively valued at the current levels. This is especially true as the index is currently trading with a P/E ratio of 24.31 versus 26.08 at the start of the year and 35.96 at the start of 2021. This makes the stocks tempting to investors.
Though the abrupt rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown, consumer spending remains strong given the elevated wage growth and lower unemployment rate.
The Fed is expected to raise interest rates by 25 bps in the FOMC meeting. Powell is betting that the economy can withstand modestly higher borrowing costs with a low unemployment rate and solid consumer spending. The initial phase of the rate increase will be good for stocks as it will reflect an improving economy. On the other hand, Ukraine and Russia are in peace talks, which seems more realistic now. The agreement will end the war, giving a boost to the stocks (read: 4 Sector ETFs to Win From Fed Rate Hike).
We have highlighted the ETFs in detail below:
WisdomTree Cloud Computing Fund (WCLD - Free Report) – Down 33.3%
WisdomTree Cloud Computing Fund offers exposure to emerging and fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 76 stocks in its basket and charges investors 45 bps in fees per year.
WisdomTree Cloud Computing Fund has amassed $737.2 million in its asset base and trades in an average daily volume of 605,000 shares. It has a Zacks ETF Rank #2 (read: Bet on Top-Ranked Tech ETFs to Ride the Recent Rebound Rally).
SPDR S&P Biotech ETF (XBI - Free Report) – Down 26.5%
SPDR S&P Biotech ETF offers equal-weight exposure across 189 biotechnology stocks. It follows the S&P Biotechnology Select Industry Index, charging investors 35 bps in annual fees.
SPDR S&P Biotech ETF has AUM of $6.6 billion and trades in an average daily volume of 14.2 million shares. XBI has a Zacks ETF Rank #2.
iShares Expanded Tech-Software Sector ETF (IGV - Free Report) – Down 22.1%
iShares Expanded Tech-Software Sector ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 127 securities.
iShares Expanded Tech-Software Sector ETF is popular with AUM of $5.9 billion. Volume is good as it exchanges 1.8 million shares a day. The product charges 43 bps in annual fees and has a Zacks ETF Rank #2.
iShares U.S. Home Construction ETF (ITB - Free Report) – Down 21.8%
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2 billion, it holds a basket of 46 stocks with heavy concentration on the top two firms.
iShares U.S. Home Construction ETF charges 41 bps in annual fees and trades in a heavy volume of around 5 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #2 (read: Housing ETFs Likely to Spring Up in the Key Selling Season).
iShares Russell Mid-Cap Growth ETF (IWP - Free Report) – Down 20.4%
With AUM of $12.5 billion, iShares Russell Mid-Cap Growth ETF offers exposure to mid-sized U.S. companies whose earnings are expected to grow at an above-average rate relative to the market by tracking the Russell MidCap Growth Index. It holds 389 securities in its basket, with none accounting for more than 1.6% of the total assets.
iShares Russell Mid-Cap Growth ETF charges 23 bps in annual fees and trades in an average daily volume of 1.3 million shares. The product has a Zacks ETF Rank #2.