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Top ETF Stories of September to Watch in October

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September is historically the worst month of the year for stocks. This year was no exception. All three key indexes recorded losses last month. The S&P 500 lost about 5%. The Nasdaq Composite was off nearly 6% in September. This month was the worst in 2023 for both indexes. The Dow logged a 3.8% decline in the past month.

Still-sticky inflation, cooling-but-still-steady jobs market, rising oil prices, worries about the government shutdown and, last but not least, the higher-for-longer rate cues weighed on the market momentum. This makes it more important to highlight key ETF events of September that may rule the market movement of October (read: September Turns Out as Worst Month of 2023: ETF Winners).

Cannabis on a High

In a significant development, the Department of Health and Human Services (HHS) recently initiated a review of marijuana's classification under the Controlled Substances Act. This move has the potential to impact the burgeoning marijuana industry favorably, which has faced federal restrictions despite state-level legalization efforts.

Since the 1970s, marijuana has been categorized as a Schedule I drug, alongside substances like heroin and LSD. The Drug Enforcement Agency (DEA) will consider reclassifying marijuana as a Schedule III drug, placing it alongside substances like ketamine, anabolic steroids, and testosterone. This change-over would be greatly beneficial for the pot companies. All cannabis ETFs surged in September, with Roundhill Cannabis ETF WEED gaining the maximum return of more than 60%. The space will be under watch in October too.

Uranium Space on an Explosive Mode

Uranium price has been witnessing a significant surge, driven by an upbeat demand forecast and lingering supply concerns amid chances of sanctions affecting Russia's nuclear fuel supply. Interest in nuclear power is also on the rise, presenting a promising opportunity for investors who anticipate global concerns about climate change to drive increased demand for this energy source. Uranium Miners ETF, Sprott Junior Uranium Miners ETF URNJ added more than 30% in September. The space is under a high momentum. Hence, other related ETFs like Global X Uranium ETF (URA - Free Report) and Sprott Uranium Miners ETF (URNM - Free Report) will be under watch in October.

Rising Rate Fears

Fed Chair Jerome Powell emphasized the need for continued vigilance in the battle against inflation in the third quarter. Powell also emphasized in September that even though inflation has moderated slightly from its peak, it is still at an undesirable level. This has led to further rate hikes or high-for-longer interest rates.

Hence, ETFs that guard investors from rising rate risks are likely to be under watch in October. iShares Interest Rate Hedged High Yield Bond ETF (HYGH - Free Report) , iShares Interest Rate Hedged Corporate Bond ETF (LQDH - Free Report) , Simplify Interest Rate Hedge ETF (PFIX - Free Report) and Advocate Rising Rate Hedge ETF are likely to be under the radar in October.

Oil Prices Swing Between Gains and Losses

Oil prices remained in solid shape in September due to reduced supplies and ebbing U.S. recession fears. Oil futures touched a fresh 2023 high of more than $95 in late September, only to dive to close out the month.

The gains could prove fleeting, some analysts warned, as quoted on CNBC. Sushant Gupta, research director of Asia refining at Wood Mackenzie said, “there are all signs that we could potentially see $100 per barrel in quarter four,” but warned that global economic fragility and incoming seasonal demand drops in the first quarter would make this unsustainable long term. In a Friday report, ING analysts signaled the oil market is “clearly in overbought territory,” the CNBC article noted.

This puts the focus on ETFs like United States Brent Oil Fund LP (BNO - Free Report) , Invesco Oil & Gas Services ETF (PXJ - Free Report) and SPDR S&P Oil & Gas Equipment & Services ETF (XES).

A Hot IPO Market

September was an eventful month for initial public offerings (IPO - Free Report) . There were successful IPOs of Arm Holdings IPO, Instacart and marketing automation firm Klaviyo. We expect the trend to continue in October. Notably, after a lull lasting for about 18 months, the U.S. IPO market is set to pick up speed in the fall, putting Renaissance IPO ETF (IPO - Free Report) in focus (read: IPO ETFs Look Hot in September: Here's Why).

Shipping ETFs Sailed Through

Global trade is showing signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. Despite recent challenges, Clerc anticipates a gradual rebound in the shipping industry as we approach 2024, as quoted on CNBC. Vincent Clerc points out that consumers in the United States and Europe will act as key tailwinds in the current surge in demand. Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) added gains of more than 8% in September and can rise even higher.

Banks Underperformed But Will be Up in October?

Bank ETFs like Invesco KBW Bank ETF (KBWB - Free Report) slumped 3.8% past month while MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) gained 7.7% past month. But trend may alter in October as the yield curve is steepening. We may see gains in bank ETFs in October.

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