The market participants continue to be jittery about the Russia-Ukraine conflict and the surging inflationary environment. They are fearing that the U.S. economy might experience a phase of recession. The impact of such macroeconomic headwinds is largely visible on the Wall Street. The major broad market indices are far away from their highs. The Dow Jones Industrial Average is down 13% from its peak level. The other two major indices, the S&P 500 and the Nasdaq composite are 17.4% and 29.5% away, respectively, from their corresponding record high and 52-week high levels (per a CNBC article).
Per the latest Labor Department report, the Consumer Price Index (CPI) jumped 8.3% year over year in April 2022, surpassing the already high Dow Jones estimate of an 8.1% rise. The metric, however, compared favorably with the 8.5% rise (the maximum since December 1981) in March.
The core inflation index, which excludes volatile components, such as food and energy prices, rose 6.2% year over year, beating the expectations of a 6% rise. The rising inflation levels dashed the hopes of inflation peaking in March.
The continued steep inflation levels are also weighing on consumers’ confidence in the United States. The growing supply-chain disturbances emanating from the ongoing Russia-Ukraine war crisis and the resurging COVID-19 cases in China might trigger concerns over further rising inflation levels. The Conference Board's measure of consumer confidence index stands at 107.3 in April this year compared with 107.6 in March.
However, certain U.S. economic data releases have been encouraging so far. The Department of Commerce reported that retail sales in April were up 0.9% month over month, below the consensus estimate of 1%. Year over year, retail sales grew 8.2% in April. The Federal Reserve reported that industrial production increased 1.1% in April, well above the consensus estimate of 0.5%.
Considering the current investing environment, let’s glance at some top-ranked ETFs that investors can consider now:
iShares U.S. Healthcare ETF ( IYH Quick Quote IYH - Free Report)
The healthcare sector is a good defensive investment option as several investors believe, consumers will have to purchase healthcare products even during tough and uncertain times. The pandemic also triggered a race to introduce vaccines, tests and treatment options, opening up investment opportunities in the healthcare sector.
The iShares U.S. Healthcare ETF seeks to track the investment results of an index composed of U.S. equities in the healthcare sector. With an AUM of $2.85 billion, IYH charges 41 basis points (bps) as fees. The iShares U.S. Healthcare ETF also sports a Zacks ETF Rack #1 (Strong Buy), with a Medium-risk outlook (read:
Bet on These 2 ETF Areas Amid Current Market Rout). The Financial Select Sector SPDR Fund ( XLF Quick Quote XLF - Free Report)
The shift toward a tighter monetary policy will push yields higher, thereby helping the financial sector. This is because rising rates will help boost profits for banks, insurance companies, discount brokerage firms and asset managers. The steepening of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a chunk of banks’ revenues, is likely to receive support from the steepening of the yield curve and a modest rise in loan demand. As the economy starts operating in full swing, the banking space will be able to generate more business.
The Financial Select Sector SPDR Fund seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the Financial Select Sector Index. XLF has an AUM of $33.47 billion and charges 10 bps of fees. XLF sports a Zacks ETF Rank #1 and a Medium-risk outlook (read:
Why Value ETFs May Outdo Growth for the Rest of 2022). Invesco S&P 500 Enhanced Value ETF ( SPVU Quick Quote SPVU - Free Report)
Value investing is looking to be more appealing, given the rebounding U.S. economy, the expectation of higher inflation and the Fed’s aggressive stance on interest rate hikes. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility than their growth and blend counterparts. Additionally, value stocks are less exposed to the trending markets and their dividend payouts offer a shield against the market turbulence.
Invesco S&P 500 Enhanced Value ETF is based on the S&P 500 Enhanced Value Index. With an AUM of $167.5 million, SPVU charges 13 bps as an expense ratio. SPVU carries a Zacks ETF Rank #1, with a Medium-risk outlook.
WisdomTree U.S. Quality Dividend Growth Fund ( DGRW Quick Quote DGRW - Free Report)
Dividend aristocrats are blue-chip dividend-paying companies with a long track record of increasing dividend payments year over year. Moreover, dividend aristocrat funds give investors dividend growth opportunities compared to other products in the space but might not necessarily have the highest yields. Demand for these funds is mainly driven by their characteristics of being the major source of consistent income for investors when returns from the equity markets are uncertain.
WisdomTree U.S. Quality Dividend Growth ETF seeks to track the investment results of dividend-paying large-cap companies with growth characteristics in the U.S. equity market. DGRW holds 299 securities in the basket and charges 28 bps in annual fees. The product has an AUM of $6.27 billion and a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read:
Guide to Dividend Aristocrat ETFs). Global X Cloud Computing ETF ( CLOU Quick Quote CLOU - Free Report)
Cloud computingand storage are expected to stay in vogue during 2022. The space received quite a push amid the coronavirus outbreak, with a vast population working from home across the globe. Even amid the global acceleration of coronavirus vaccine rollout, demand for cloud computing is set to stay robust and continue post pandemic.
It is worth knowing here that cloud computing and storage found applications in social networking, messaging apps and streaming services. The same empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. Cloud computing is also supporting organizations in remotely processing a lot of information, and developing and running key applications and services.
Global X Cloud Computing ETF provides exposure to 36 securities and seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Cloud Computing Index.The product managed assets worth $658.7 million and charges 68 bps of annual fees and expenses. CLOU currently carries a Zacks ETF Rank #2.