May 2022 was downbeat for Wall Street, with only the last week staging a rally. Notably, June is not known for good returns. A consensus carried out from 1950 to 2021 shows that June ended up offering positive stock returns in 38 years and negative returns in 34 years, per
, with an average positive return of 0.8%. moneychimp.com
Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
Dividend Aristocrats – SPDR S&P Dividend ETF ( SDY Quick Quote SDY - Free Report)
The downfall in markets is showing no signs of abating. High inflation, supply chain woes and rising rate worries have hit Wall Street this year. Against this backdrop, dividend ETFs have acted as great safety bets. Be it a bull or a bear market, investors mostly love dividend-paying stocks. After all, who doesn’t like a steady stream of current income along with capital appreciation?
With high-dividend ETFs sporting a richer valuation than divided aristocrats, investors may try out dividend-growing ETFs or aristocrats in June. SDY has a Zacks Rank #2 (Buy) (read:
10 High-Dividend ETFs Available at Cheaper Valuation). S&P 500 – Vanguard S&P 500 ETF ( VOO Quick Quote VOO - Free Report)
If you are nervous about the single stock-picking approach in the current volatile environment, you can simply bet on the S&P 500 Index through a low-cost option like VOO. Warren Buffett is also a proponent of low-cost index fund investing. The average annualized total return for the S&P 500 Index over the past 90 years is around
10% before adjusting for inflation and the index gives exposure to 80% of the U.S. market cap, per financial veterans. It yields about 1.47% annually and charges only 3 bps in fees. The fund has a Zacks Rank #3 (Hold). U.S. Short-Term Treasury – Vanguard ShortTerm Bond ETF ( BSV Quick Quote BSV - Free Report)
Higher rates might lead to huge losses for investors who do not hold bonds until maturity. As a result, a short-duration bond ETF like BSV acts as a better hedge to rising rates. The average maturity and effective duration are 2.8 years and 2.7 years, respectively. Yield-to-maturity is 3.03%. It charges 4 bps in annual fees. The fund currently yields 1.47% annually.
Financials – Vanguard Financials ETF ( VFH Quick Quote VFH - Free Report)
This has been a beaten-down space amid the pandemic. However, with easing social distancing restrictions, the return of risk-on trade sentiments and higher inflationary pressure, long-term bond yields have been riding higher in the near term. This should benefit financial stocks that perform well in a rising rate environment or when the yield curve steepens. The fund has a Zacks Rank #1.
Semiconductors – VanEck Semiconductor ETF ( SMH Quick Quote SMH - Free Report)
The demand is high for semiconductors/chips while the industry is reeling under supply shortage. The world’s biggest foundries — including Taiwan Semiconductor Manufacturing Company, Samsung and Intel — are thus considering further price hikes, per a CNBC article. Forrester analyst Glenn O’Donnell told CNBC that he expects chip prices to rise about 10-15%, or roughly in line with inflation. McKinsey expects it to become a trillion-dollar industry by 2030 (read:
Time for Semiconductor ETFs?).