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On Wednesday, the Fed is anticipated to announce a 25-basis point increase in interest rates and indicate a break in its most aggressive rate hike cycle since the 1980s. However, there is a disagreement between policymakers and markets regarding the trajectory of rates. While the top central bank predicts borrowing costs to remain steady until 2023, investors are banking on cuts post-summer.
Despite futures markets indicating an almost 90% likelihood of a rate hike, doubts about a 25-basis point increase have emerged due to issues at lender First Republic, causing concerns about the U.S. banking industry. JPMorgan Chase & Co will likely buy First Republic Bank after its was taken over by regulators, making the troubled regional lender the third major U.S. institution to fail since March this year.
JPMorgan will “assume all deposits, including all uninsured deposits, and substantially all assets” of First Republic, the California Department of Financial Protection and Innovation said in a statement.
Against this backdrop, below we highlight a few ETFs that could gain ahead.
If the Fed shows signs of agreeing with the market's view, it could drive Treasury yields down, potentially benefiting the mega-cap tech stocks that have propelled the market upwards this year. Growth stocks like technology fare better in a falling rate environment. Moreover, most of the big tech companies have come up with upbeat earnings this reporting season.
If the Fed nears the final Fed rate hike, the small-cap stocks may find some relief. This is especially true given the regional banking crisis has resurfaced again. This is a key negative for the space. Thus, a favor from the Fed may prove to be a tailwind for the small-cap space. Low rates are great for small-cap stocks especially as the section is mainly cash-strapped. Moreover, signs of economic recovery would favor this otherwise beaten-down zone.
Though markets remained more-or-less steady in recent months, there is still some caution in markets because the inflation worries are not behind us. Banking crisis is also scary. With this, opportunities for low-volatility ETFs remain alive, no matter what high stocks and ETFs hit, having received a favor from the Fed.
Many investors may land on high dividend-paying stocks and ETFs in search of higher current income. The underlying FTSE High Dividend Yield Index of the fund consists of common stocks of companies which pay dividends that are generally higher than average.
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Will This Be the Final Fed Rate Hike? ETFs to Win
On Wednesday, the Fed is anticipated to announce a 25-basis point increase in interest rates and indicate a break in its most aggressive rate hike cycle since the 1980s. However, there is a disagreement between policymakers and markets regarding the trajectory of rates. While the top central bank predicts borrowing costs to remain steady until 2023, investors are banking on cuts post-summer.
Despite futures markets indicating an almost 90% likelihood of a rate hike, doubts about a 25-basis point increase have emerged due to issues at lender First Republic, causing concerns about the U.S. banking industry. JPMorgan Chase & Co will likely buy First Republic Bank after its was taken over by regulators, making the troubled regional lender the third major U.S. institution to fail since March this year.
JPMorgan will “assume all deposits, including all uninsured deposits, and substantially all assets” of First Republic, the California Department of Financial Protection and Innovation said in a statement.
Against this backdrop, below we highlight a few ETFs that could gain ahead.
ETFs in Focus
Technology Select Sector SPDR ETF (XLK - Free Report)
If the Fed shows signs of agreeing with the market's view, it could drive Treasury yields down, potentially benefiting the mega-cap tech stocks that have propelled the market upwards this year. Growth stocks like technology fare better in a falling rate environment. Moreover, most of the big tech companies have come up with upbeat earnings this reporting season.
SPDR Portfolio S&P 600 Small Cap ETF (SPSM - Free Report)
If the Fed nears the final Fed rate hike, the small-cap stocks may find some relief. This is especially true given the regional banking crisis has resurfaced again. This is a key negative for the space. Thus, a favor from the Fed may prove to be a tailwind for the small-cap space. Low rates are great for small-cap stocks especially as the section is mainly cash-strapped. Moreover, signs of economic recovery would favor this otherwise beaten-down zone.
iShares MSCI USA Min Vol Factor ETF (USMV - Free Report)
Though markets remained more-or-less steady in recent months, there is still some caution in markets because the inflation worries are not behind us. Banking crisis is also scary. With this, opportunities for low-volatility ETFs remain alive, no matter what high stocks and ETFs hit, having received a favor from the Fed.
Vanguard High Dividend Yield ETF (VYM - Free Report)
Many investors may land on high dividend-paying stocks and ETFs in search of higher current income. The underlying FTSE High Dividend Yield Index of the fund consists of common stocks of companies which pay dividends that are generally higher than average.