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September is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2021 has revealed that September ended up offering positive returns in 32 years and negative returns in 40 years, with an average return of negative 0.69%, which is worse than any other month.
Terrifying financial events like the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008 all crept up in the month of September. This September is no different with Fed rate hike worries rising in the United States.
High inflation, supply chain issues, recessionary fears and last but not the least the constant fear about the new variant of COVID-19 could weigh on the market momentum. All these make it more important to pin point ETFs that have the power to navigate such threats.
ETFs in Focus
Invesco DB US Dollar Index Bullish ETF (UUP - Free Report)
The U.S. dollar has been rising lately thanks to fatter and faster Fed rate hikes. Higher rates in the United States would attract more capital to the country from foreign investors, thereby boosting the U.S. dollar against the basket of other currencies. The fund is up 14.6% this year and 0.8% past week (as of Sep 2, 2022). The fund has a Zacks ETF Rank #2 (Buy) (read: Higher Yields to Fuel Rally in These ETFs).
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
A lot of factors are favoring this sector. Decent consumer confidence level, pent-up demand from COVID-19 lockdowns and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector performs well in a rising rate environment. The fund has a Zacks Rank #1 (Strong Buy).
The S&P 500 has been in weak shape in late August. The index is down 16.8% year-to-date and 2.6% past week. So, the index may try to rebound in September as much of the bad news and economic fears are currently baked in the valuation. However, since rising rate worries have been prevalent in the U.S. economy currently, investors should tap the value corner of the index as value stocks fare better in a rising rate environment. The fund SPYV has a Zacks ETF Rank #1 (Follow Oppenheimer? Buy S&P 500 ETFs).
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. As a result, these products offer cushion against any kind of turbulence in the market. The fund charges 35 bps in fees and yields 2.73% annually. The fund has a Zacks ETF Rank #2.
The underlying Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to small-capitalization U.S. companies with high free cash flow yields. The fund charges 59 bps in fees and yields 3.27% annually.
Small-cap stocks have cheaper valuation than larger ones. However, many investors are believing that markets have priced in the economic recession. Hence, investors with a strong stomach for risks can try out small-cap stocks that have strong free cash flow yields.
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Fearing a September Lull? Buy These 5 ETFs
September is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2021 has revealed that September ended up offering positive returns in 32 years and negative returns in 40 years, with an average return of negative 0.69%, which is worse than any other month.
Terrifying financial events like the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008 all crept up in the month of September. This September is no different with Fed rate hike worries rising in the United States.
High inflation, supply chain issues, recessionary fears and last but not the least the constant fear about the new variant of COVID-19 could weigh on the market momentum. All these make it more important to pin point ETFs that have the power to navigate such threats.
ETFs in Focus
Invesco DB US Dollar Index Bullish ETF (UUP - Free Report)
The U.S. dollar has been rising lately thanks to fatter and faster Fed rate hikes. Higher rates in the United States would attract more capital to the country from foreign investors, thereby boosting the U.S. dollar against the basket of other currencies. The fund is up 14.6% this year and 0.8% past week (as of Sep 2, 2022). The fund has a Zacks ETF Rank #2 (Buy) (read: Higher Yields to Fuel Rally in These ETFs).
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
A lot of factors are favoring this sector. Decent consumer confidence level, pent-up demand from COVID-19 lockdowns and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector performs well in a rising rate environment. The fund has a Zacks Rank #1 (Strong Buy).
SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)
The S&P 500 has been in weak shape in late August. The index is down 16.8% year-to-date and 2.6% past week. So, the index may try to rebound in September as much of the bad news and economic fears are currently baked in the valuation. However, since rising rate worries have been prevalent in the U.S. economy currently, investors should tap the value corner of the index as value stocks fare better in a rising rate environment. The fund SPYV has a Zacks ETF Rank #1 (Follow Oppenheimer? Buy S&P 500 ETFs).
SPDR S&P Dividend ETF (SDY - Free Report)
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. As a result, these products offer cushion against any kind of turbulence in the market. The fund charges 35 bps in fees and yields 2.73% annually. The fund has a Zacks ETF Rank #2.
Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report)
The underlying Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to small-capitalization U.S. companies with high free cash flow yields. The fund charges 59 bps in fees and yields 3.27% annually.
Small-cap stocks have cheaper valuation than larger ones. However, many investors are believing that markets have priced in the economic recession. Hence, investors with a strong stomach for risks can try out small-cap stocks that have strong free cash flow yields.