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U.S. Stocks Log Worst Q1 in 2 Years: Top-Ranked ETFs Shine

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Wall Street wrapped up its worst performance in two years thanks to the ongoing conflict in Ukraine and its inflationary effect on prices. The bets on faster and deeper Fed rate hikes added to the chaos.

While there have been losers in many corners of the space, we highlight five ETFs from different industries that have gained handsomely in the first quarter. These have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). The funds are, namely, Energy Select Sector SPDR (XLE - Free Report) , First Trust Materials AlphaDEX Fund (FXZ - Free Report) , SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) , Invesco S&P 500 Value with Momentum ETF (SPVM - Free Report) and U.S. Global Jets ETF (JETS - Free Report) . These are likely to continue outperforming should the trends prevail.

Q1 Market Trends

The Dow Jones and the S&P 500 lost 4.6% and 4.9%, respectively, while the Nasdaq Composite Index shed 9% in the first quarter. The combination of factors like the start of a rate hike cycle, skyrocketing inflation and Russia’s invasion of Ukraine led to risk-off trade in the quarter.

The central bank raised interest rates by 25 bps to 0.25%-0.50% and signaled hikes in all the six remaining meetings this year to tackle the fastest inflation in four decades even as risks to economic growth mount. Fed Chair Jerome Powell also expressed confidence that the American economy is strong enough to withstand a tighter monetary policy (read: ETFs to Buy on Latest Fed Rate Hike and More Hereafter).

Additionally, the ongoing Russia-Ukraine war has led to supply disruption fears in an already-tight commodity market, thereby resulting in amplified inflation worries.

We have profiled the above-mentioned ETFs in detail below:

Energy Select Sector SPDR (XLE - Free Report) – Up 39%

Energy Select Sector SPDR is the largest and the most-popular ETF in the energy space, with AUM of $37.3 billion and an average daily volume of 44 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 21 securities in its basket with heavy concentration on the top two firms.

Energy Select Sector SPDR charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: Best ETF Investment Strategies for Q2 2022).

First Trust Materials AlphaDEX Fund (FXZ - Free Report) – Up 15.4%

First Trust Materials AlphaDEX Fund targets the broad materials sector and follows the StrataQuant Materials Index. It holds 37 stocks in its basket with chemicals taking the largest share at 45.1% of the portfolio while industrial metals and mining round off the next spot with double-digit exposure.

First Trust Materials AlphaDEX Fund has accumulated $1.7 billion in its asset base and trades in volumes of 463,000 shares a day on average. It charges 64 bps in annual fees and has a Zacks ETF Rank #1.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) – Up 6.1%

SPDR Portfolio S&P 500 High Dividend ETF provides exposure to stocks with a high level of dividend income and the opportunity for capital appreciation by tracking the S&P 500 High Dividend Index. Holding 80 stocks in its basket, the fund is well diversified across securities with each making up for less than 1.6% of assets. Utilities, financials, energy and real estate are the top four sectors with double-digit exposure each.

SPDR Portfolio S&P 500 High Dividend ETF has AUM of $6.5 billion and trades in volume of about 2.4 million shares. It charges 7 bps in annual fees and has a Zacks ETF Rank of #1  with a Medium risk outlook (read: Guide to High Dividend Paying ETFs).

Invesco S&P 500 Value with Momentum ETF (SPVM - Free Report) – Up 5.3%

Invesco S&P 500 Value with Momentum ETF offers exposure to 101 securities in the S&P 500 Index, having the highest “value scores” and “momentum scores” by tracking the S&P 500 High Momentum Value Index. It has key holdings in financials and energy with a double-digit allocation each.  

Invesco S&P 500 Value with Momentum ETF has accumulated $58 million in its asset base and trades in volume of 22,000 shares a day on average. SPVM charges 39 bps in annual fees and has a Zacks ETF Rank #2.

U.S. Global Jets ETF (JETS - Free Report) – Up 3.2%

U.S. Global Jets ETF provides pure-play exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. The product holds 51 securities (read: Oil Slumps More Than 20% From Recent High: ETFs to Win/Lose).

U.S. Global Jets ETF has gathered $3.5 billion in its asset base, while charging investors 60 bps in annual fees. It trades in an average daily volume of 11.5 million shares and has a Zacks ETF Rank #2 with a High risk outlook.