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5 ETF Picks for December

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Wall Street witnessed a winning phase in November. Hopes of smaller interest rate hikes from December, thanks to a slight decline in inflation, renewed investors’ risk-on trading. However, renewed COVID-19 outbreaks in China and the resultant lockdowns as well as a weakening global growth outlook, occasionally weighed on sentiments.

Additionally, the holiday season started on a strong note despite concerns about inflation and higher prices. Holiday spending is expected to be healthy despite inflationary challenges, with retail sales likely to grow 6-8% from the 2021 level during November and December to $942.6-$960.4 billion, per the National Retail Federation.

Overall, the S&P 500, the Dow Jones, the Nasdaq and the Russell 2000 gained 8.5%, 7.6%, 9% and 5.5%, respectively, past month (as of Dec 1, 2022). Against this backdrop, below, we highlight a few top-ranked ETFs that could be tapped for December.

ETFs in Focus

iShares U.S. Insurance ETF (IAK - Free Report) – Zacks Rank #1

The Federal Reserve chief predicted a smaller interest rate hike in December and economic data suggested that the earlier hikes were slowing the economy as planned. “The time for moderating the pace of rate increases may come as soon as the December meeting,” Chairman Jerome Powell said lately.

Still, he cautioned that the central bank would need “substantially more evidence” of inflation declining before pausing rate hikes. This should lower short-term bond yields and increase the long-term ones, resulting in higher net interest margin and a steepening yield curve. This kind of scenario is great for financial stocks and ETFs.

iShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) – Zacks Rank #3 (Hold)

As bets over slower interest rate hikes strengthened, there is a high chance December will see a broader stock market rally. In any case, December remains an upbeat month for the stock market. The upbeat holiday season sales forecast, despite inflationary environment, is another plus.

Schwab U.S. Dividend Equity ETF (SCHD - Free Report) – Zacks Rank #3

The underlying Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend-yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios. The fund yields 3.13% annually and charges 6 bps in fees.

This fund offers both benefits — quality exposure and higher yields. In the face of a likely recession, this kind of a fund deserves a place in investors’ portfolio.

iShares U.S. Consumer Staples ETF (IYK - Free Report) – Zacks Rank #2 (Buy)

Many analysts are predicting a recession in 2023.Morgan Stanley’s Mike Wilson, who has an S&P 500 year-end target of 3,900 for next year, warns that corporate America is getting ready to release downward earnings revisions that will hurt stocks. Since consumer staples is a recession-proof sector, investors may count on this sector and the fund.  

Global X Funds Global X Health

United States takes about 44.5% of the fund, followed by 14.6% weight in Japan.  Forecasts suggest that the global Health & Wellness market could grow from nearly $4.2 billion in 2021 to more than $6.9 billion by 2031, per Research and Markets, June 2021, according to Global X ETFs.

The pandemic forced many to-re-consider their fitness habits. This included a likely broadening of the market for in-home workout equipment as well as a changing of norms around apparel (e.g., popularity of “athleisure” wear). Consumer Discretionary takes about 68.8% of the fund ,while consumer staples holds about 24.5% of the fund.

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