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Wall Street logged the best weekly performance of 2023 last week. The S&P 500 advanced 5.9%, the Dow Jones added 5.1%, the Nasdaq surged 6.6% and the Russell 2000 jumped about 7% last week on hopes that the Fed is done with its rate-hiking campaign due to weak jobs data. U.S. benchmark treasury yields slumped to 4.57% on Nov 3 from 4.88% recorded at the start of the week.
Notably, the U.S. economy added 150,000 jobs in October 2023, about half of a downwardly revised 297,000 in September, and below market forecasts of 180,000. The report revealed that the labor market is slowly cooling as several strikes including from members of the UAW weighed on the manufacturing payrolls.
The unemployment rate reached 3.9% in October. Since their recent lows in April, these measures are up by 0.5 percentage point. However, the unemployment rate marked the highest level since January 2022, against expectations that it would hold steady at 3.8%, per CNBC. Employment Rate in the United States declined to 60.20% in October from 60.40% in September of 2023.
Against this backdrop, below we highlight a few ETF areas that became the key beneficiaries of this somber jobs data.
ETF Areas That Won Considerably
Small-Caps – iShares Russell 2000 ETF (IWM - Free Report)
The ETF IWM surged 2.7% on Nov 3 and added another 2.7% after hours.
The fund has struggled a bit in the past few months on higher rates and talks of economic slowdown. It is flat in the past six-month period. However, upbeat U.S. GDP data for the third quarter and chances of a less-hawkish Fed ahead acted as a tailwind for IWM. Notably, small-caps are more domestically-focused. Hence, the all-important holiday season is another positive for the fund.
Technology – Global X Cloud Computing ETF (CLOU - Free Report)
The ETF CLOU soared 2.6% on Nov 3 and advanced another 3.8% after hours.
Though the technology space has been sturdy this year, the fund CLOU added only 1.7% past month as rates rose massively and this high-growth space faltered despite immense potential. However, market sentiment on Friday boosted the fund materially. Likelihood of lower rates and the combination of cloud computing and Artificial Intelligence will drive the fund ahead.
The ETF EEM gained 1.8% on Nov 3 and gained 2.0% after hours.
The fund EEM is down 2.4% in the past six months. The dollar strength, rising rates in the United States, capital outflows, a slump in China’s economy, strong inflation and a debacle in Russia investing have all added up to the EM crisis.
Investors should note that emerging market investing outperforms when the greenback remains subdued. Talks of a less-hawkish Fed caused the greenback to lose about 1% on Nov 3 and EEM gained. Chances of lower U.S. yield should boost inflows to emerging economies. Plus, the space is undervalued compared with the S&P 500.
Real Estate – Vanguard Real Estate ETF (VNQ - Free Report)
The ETF VNQ jumped 3.3% on Nov 3 and added 2.4% after hours.
The real estate sector is significantly influenced by changes in interest rates. The fund is debt-dependent and hence underperforms in a rising rate environment. Due to higher rates, VNQ was off 6.5% in the past six-month period. But the fund surged on Friday as rates dived materially. The fund yields 4.62% annually.
The ETF FINX popped 3.8% on Nov 3 and added 1.6% after hours.
Although the space comes from the technology sector, it deserves a special mention ahead of Holiday Season. Several fintech firms came up with upbeat earnings this season and stocks surged massively. Holiday spending is expected to rise around 3.5% if we go by data from several market research firms. With decreasing personal income and savings rates, inflation-hit consumers are likely to opt for “Buy-Now-Pay-Later” scheme and fintech firms should win on this practice (read: Why You Should Tap Fintech ETFs & Stocks in the Holiday Season).
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5 Winning ETF Areas on Soft Jobs Data
Wall Street logged the best weekly performance of 2023 last week. The S&P 500 advanced 5.9%, the Dow Jones added 5.1%, the Nasdaq surged 6.6% and the Russell 2000 jumped about 7% last week on hopes that the Fed is done with its rate-hiking campaign due to weak jobs data. U.S. benchmark treasury yields slumped to 4.57% on Nov 3 from 4.88% recorded at the start of the week.
Notably, the U.S. economy added 150,000 jobs in October 2023, about half of a downwardly revised 297,000 in September, and below market forecasts of 180,000. The report revealed that the labor market is slowly cooling as several strikes including from members of the UAW weighed on the manufacturing payrolls.
The unemployment rate reached 3.9% in October. Since their recent lows in April, these measures are up by 0.5 percentage point. However, the unemployment rate marked the highest level since January 2022, against expectations that it would hold steady at 3.8%, per CNBC. Employment Rate in the United States declined to 60.20% in October from 60.40% in September of 2023.
Against this backdrop, below we highlight a few ETF areas that became the key beneficiaries of this somber jobs data.
ETF Areas That Won Considerably
Small-Caps – iShares Russell 2000 ETF (IWM - Free Report)
The ETF IWM surged 2.7% on Nov 3 and added another 2.7% after hours.
The fund has struggled a bit in the past few months on higher rates and talks of economic slowdown. It is flat in the past six-month period. However, upbeat U.S. GDP data for the third quarter and chances of a less-hawkish Fed ahead acted as a tailwind for IWM. Notably, small-caps are more domestically-focused. Hence, the all-important holiday season is another positive for the fund.
Technology – Global X Cloud Computing ETF (CLOU - Free Report)
The ETF CLOU soared 2.6% on Nov 3 and advanced another 3.8% after hours.
Though the technology space has been sturdy this year, the fund CLOU added only 1.7% past month as rates rose massively and this high-growth space faltered despite immense potential. However, market sentiment on Friday boosted the fund materially. Likelihood of lower rates and the combination of cloud computing and Artificial Intelligence will drive the fund ahead.
Emerging Markets – iShares MSCI Emerging Markets ETF (EEM - Free Report)
The ETF EEM gained 1.8% on Nov 3 and gained 2.0% after hours.
The fund EEM is down 2.4% in the past six months. The dollar strength, rising rates in the United States, capital outflows, a slump in China’s economy, strong inflation and a debacle in Russia investing have all added up to the EM crisis.
Investors should note that emerging market investing outperforms when the greenback remains subdued. Talks of a less-hawkish Fed caused the greenback to lose about 1% on Nov 3 and EEM gained. Chances of lower U.S. yield should boost inflows to emerging economies. Plus, the space is undervalued compared with the S&P 500.
Real Estate – Vanguard Real Estate ETF (VNQ - Free Report)
The ETF VNQ jumped 3.3% on Nov 3 and added 2.4% after hours.
The real estate sector is significantly influenced by changes in interest rates. The fund is debt-dependent and hence underperforms in a rising rate environment. Due to higher rates, VNQ was off 6.5% in the past six-month period. But the fund surged on Friday as rates dived materially. The fund yields 4.62% annually.
Fintech – Global X FinTech ETF (FINX - Free Report)
The ETF FINX popped 3.8% on Nov 3 and added 1.6% after hours.
Although the space comes from the technology sector, it deserves a special mention ahead of Holiday Season. Several fintech firms came up with upbeat earnings this season and stocks surged massively. Holiday spending is expected to rise around 3.5% if we go by data from several market research firms. With decreasing personal income and savings rates, inflation-hit consumers are likely to opt for “Buy-Now-Pay-Later” scheme and fintech firms should win on this practice (read: Why You Should Tap Fintech ETFs & Stocks in the Holiday Season).