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Diagnosis of Economy on Health Day: 6 ETFs That Look Fit
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After wrapping up its worst quarterly performance in two years, Wall Street extended its rout to start Q2 as a combination of factors like the start of a rate hike cycle, skyrocketing inflation, Russia’s invasion of Ukraine and an inverted yield curve led to risk-off trade in the quarter. The dismal performance came despite an improving economy, solid consumer confidence, job growth, and higher spending.
Let us examine the health of the U.S. economy this World Health Day and bring to investors’ attention the key developments and some solid picks for a robust investment portfolio.
Similar to the six vital nutrients required for good health, six pillars support the economy. Here, we have picked six essential market nutrients in the form of sectors and then zeroed in on stocks that have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with higher AUM in their respective sectors.
Vitamins: Consumer Sector
The consumer sector has been enjoying strong optimism led by higher spending power, elevated wage growth and lower unemployment rate though a resurgence in COVID-19 cases in China and rising rates weighed on sentiments. This has led to higher demand for all types of products and services in the economy, taking the consumer sector higher. It will continue to give the economy its regular dose of vitamins (read: Will ETFs Gain as US Consumer Confidence Improves in March?).
Within this sector, Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , which offers exposure to the broad consumer discretionary space, is a great pick for investors. It tracks the Consumer Discretionary Select Sector Index. Consumer Discretionary Select Sector SPDR Fund holds 60 securities in its basket with key holdings in automobiles, Internet & direct marketing retail, hotels, restaurants and leisure, and specialty retail round off the next three spots with a double-digit allocation each.
Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $19.7 billion and an average daily volume of around 12 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Proteins: Financial Sector
Like protein, the financial sector, helps in carrying out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. The stocks in this sector have shown strength on surging yields and an improving economy. Rising rates are highly profitable for the financial sector as the steepening yield curve would bolster profits for banks, insurance companies, discount brokerage firms and asset managers. However, the yield curve is flattening lately on hawkish Fed view and has inverted for the first time in three years, signaling U.S. recession (read: Yield Curve Inverts: Which Value ETFs Should You Buy Now?).
That said, iShares U.S. Insurance ETF (IAK - Free Report) is the outperformer, having gained about 9% so far this year. It offers exposure to U.S. companies that provide life, property and casualty, and full line insurance by tracking the Dow Jones U.S. Select Insurance Index. iShares U.S. Insurance ETF holds 59 securities in its basket with about half of the portfolio dominated by property & casualty insurance, while life & health insurance and multiline insurance round off the top three spots with a double-digit exposure each.
iShares U.S. Insurance ETF has amassed $234.8 million in its asset base while trading in an average trading volume of 47,000 shares. It charges 42 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
Minerals: Medical Sector
Just like minerals are important for bone structure, healthcare is crucial to the economy. In fact, it is the backbone of an economy. Healthcare is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.
Though the sector has shown some strength over the past month on investors’ flight to defensive investments, it is in red from a year-to-date look. However, VanEck Vectors Pharmaceutical ETF (PPH) bucked the trend, gaining 6.8% so far this year. It follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well a production, marketing and sales of pharmaceuticals.
VanEck Vectors Pharmaceutical ETF holds 25 stocks in its basket and amassed $383.2 million in its asset base. It trades in a good volume of about 89,000 shares a day and charges 35 bps in fees per year from investors. VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #3.
Carbohydrates: Technology Sector
Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services including electronics, software, computers and social media. The sector has been beaten down badly by soaring yields, which has resulted in a steep sell-off in the growth stocks. However, beaten-down prices seem to be an attractive entry point as the global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping.
WisdomTree Cloud Computing Fund 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 $859.5 million in its asset base and trades in an average daily volume of 455,000 shares. It has a Zacks ETF Rank #2 (Buy).
Fats: Construction Sector
The construction sector — accounting for 5.5% of GDP — provides energy backup to the economy. This is because construction activity picks up when the economy strengthens. The sector is witnessing some slowdown this year as the cost of raw material prices and construction has increased in tandem with the rise in commodity prices. Additionally, mortgage rates spiked to 5% for the first time in a decade that will likely slow down demand and temper home prices.
iShares U.S. Home Construction ETF (ITB - Free Report) , which has plunged 29.1% this year, seems to emerge strongly when good tidings started to set it. It 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, iShares U.S. Home Construction ETF holds a basket of 47 stocks and charges 41 bps in annual fees.
iShares U.S. Home Construction ETF trades in a heavy volume of around 5 million shares a day on average and has a Zacks ETF Rank #2 (read: Tough Time for Homebuilding ETFs Ahead?).
Water: Transport Sector
Transport enables the smooth movement of freight and passengers through different modes such as rail, trucks, ships and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. The sector has rebounded strongly with more Americans getting vaccinated, business and economies being reopened, and consumer confidence growing.
iShares U.S. Transportation ETF (IYT - Free Report) offers exposure to U.S. airline, railroad, and trucking companies by tracking the S&P Transportation Select Industry FMC Capped Index. Holding 52 stocks in its basket, it charges 41 bps in annual fees and sees a solid trading volume of more than 206,000 shares a day.
iShares U.S. Transportation ETF has $1.5 billion in AUM and a Zacks ETF Rank #2.
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Diagnosis of Economy on Health Day: 6 ETFs That Look Fit
After wrapping up its worst quarterly performance in two years, Wall Street extended its rout to start Q2 as a combination of factors like the start of a rate hike cycle, skyrocketing inflation, Russia’s invasion of Ukraine and an inverted yield curve led to risk-off trade in the quarter. The dismal performance came despite an improving economy, solid consumer confidence, job growth, and higher spending.
Let us examine the health of the U.S. economy this World Health Day and bring to investors’ attention the key developments and some solid picks for a robust investment portfolio.
Similar to the six vital nutrients required for good health, six pillars support the economy. Here, we have picked six essential market nutrients in the form of sectors and then zeroed in on stocks that have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with higher AUM in their respective sectors.
Vitamins: Consumer Sector
The consumer sector has been enjoying strong optimism led by higher spending power, elevated wage growth and lower unemployment rate though a resurgence in COVID-19 cases in China and rising rates weighed on sentiments. This has led to higher demand for all types of products and services in the economy, taking the consumer sector higher. It will continue to give the economy its regular dose of vitamins (read: Will ETFs Gain as US Consumer Confidence Improves in March?).
Within this sector, Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , which offers exposure to the broad consumer discretionary space, is a great pick for investors. It tracks the Consumer Discretionary Select Sector Index. Consumer Discretionary Select Sector SPDR Fund holds 60 securities in its basket with key holdings in automobiles, Internet & direct marketing retail, hotels, restaurants and leisure, and specialty retail round off the next three spots with a double-digit allocation each.
Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $19.7 billion and an average daily volume of around 12 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Proteins: Financial Sector
Like protein, the financial sector, helps in carrying out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. The stocks in this sector have shown strength on surging yields and an improving economy. Rising rates are highly profitable for the financial sector as the steepening yield curve would bolster profits for banks, insurance companies, discount brokerage firms and asset managers. However, the yield curve is flattening lately on hawkish Fed view and has inverted for the first time in three years, signaling U.S. recession (read: Yield Curve Inverts: Which Value ETFs Should You Buy Now?).
That said, iShares U.S. Insurance ETF (IAK - Free Report) is the outperformer, having gained about 9% so far this year. It offers exposure to U.S. companies that provide life, property and casualty, and full line insurance by tracking the Dow Jones U.S. Select Insurance Index. iShares U.S. Insurance ETF holds 59 securities in its basket with about half of the portfolio dominated by property & casualty insurance, while life & health insurance and multiline insurance round off the top three spots with a double-digit exposure each.
iShares U.S. Insurance ETF has amassed $234.8 million in its asset base while trading in an average trading volume of 47,000 shares. It charges 42 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
Minerals: Medical Sector
Just like minerals are important for bone structure, healthcare is crucial to the economy. In fact, it is the backbone of an economy. Healthcare is one of the largest and fastest-growing sectors thanks to an aging population, growing middle class, and insatiable demand for new treatments and drugs for many illnesses. About 10% of economic growth comes from this sector.
Though the sector has shown some strength over the past month on investors’ flight to defensive investments, it is in red from a year-to-date look. However, VanEck Vectors Pharmaceutical ETF (PPH) bucked the trend, gaining 6.8% so far this year. It follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well a production, marketing and sales of pharmaceuticals.
VanEck Vectors Pharmaceutical ETF holds 25 stocks in its basket and amassed $383.2 million in its asset base. It trades in a good volume of about 89,000 shares a day and charges 35 bps in fees per year from investors. VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #3.
Carbohydrates: Technology Sector
Similar to carbs that provide energy to the muscles and brain, the technology sector powers the economy with its wide range of products and services including electronics, software, computers and social media. The sector has been beaten down badly by soaring yields, which has resulted in a steep sell-off in the growth stocks. However, beaten-down prices seem to be an attractive entry point as the global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping.
WisdomTree Cloud Computing Fund (WCLD - Free Report) , which gives exposure to emerging and fast-growing U.S.-listed companies (including ADRs) primarily focused on cloud software and services, seems a solid choice (read: Wall Street Had the Best Week Since Nov 2020: 5 ETF Winners).
WisdomTree Cloud Computing Fund 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 $859.5 million in its asset base and trades in an average daily volume of 455,000 shares. It has a Zacks ETF Rank #2 (Buy).
Fats: Construction Sector
The construction sector — accounting for 5.5% of GDP — provides energy backup to the economy. This is because construction activity picks up when the economy strengthens. The sector is witnessing some slowdown this year as the cost of raw material prices and construction has increased in tandem with the rise in commodity prices. Additionally, mortgage rates spiked to 5% for the first time in a decade that will likely slow down demand and temper home prices.
iShares U.S. Home Construction ETF (ITB - Free Report) , which has plunged 29.1% this year, seems to emerge strongly when good tidings started to set it. It 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, iShares U.S. Home Construction ETF holds a basket of 47 stocks and charges 41 bps in annual fees.
iShares U.S. Home Construction ETF trades in a heavy volume of around 5 million shares a day on average and has a Zacks ETF Rank #2 (read: Tough Time for Homebuilding ETFs Ahead?).
Water: Transport Sector
Transport enables the smooth movement of freight and passengers through different modes such as rail, trucks, ships and air. It occupies an important place in the world market and is often considered a barometer of broad economic health. The sector has rebounded strongly with more Americans getting vaccinated, business and economies being reopened, and consumer confidence growing.
iShares U.S. Transportation ETF (IYT - Free Report) offers exposure to U.S. airline, railroad, and trucking companies by tracking the S&P Transportation Select Industry FMC Capped Index. Holding 52 stocks in its basket, it charges 41 bps in annual fees and sees a solid trading volume of more than 206,000 shares a day.
iShares U.S. Transportation ETF has $1.5 billion in AUM and a Zacks ETF Rank #2.