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U.S. GDP Growth Beats Expectations in Q4: ETFs to Benefit
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The U.S. economy exhibited a robust performance in the fourth quarter of 2023, with the real Gross Domestic Product (GDP) expanding at an annualized rate of 3.3%, according to the Bureau of Economic Analysis' (BEA) initial estimate. This growth exceeded market expectations of 2% and followed a 4.9% increase in the third quarter.
That said, some specific areas of the ETF industry will likely benefit from solid GDP numbers. ETFs like SPDR S&P Retail ETF (XRT - Free Report) , iShares U.S. Industrials ETF (IYJ - Free Report) , SPDR Dow Jones REIT ETF (RWR - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) and Vanguard Small-Cap Growth ETF (VBK - Free Report) are expected to outperform.
GDP Price Index and Core PCE
The report detailed that the Gross Domestic Product Price Index was recorded at 1.5% in the fourth quarter, a decrease from the previous quarter's 3.3%. Additionally, the Core Personal Consumption Expenditures (PCE) Price Index maintained a steady rise of 2% on a quarterly basis, aligning with prior quarter figures and market predictions.
Positive Outlook on Economic Growth
U.S. Treasury Secretary Janet Yellen expressed optimism regarding the fourth quarter's economic growth. She emphasized that the strong growth, coupled with a core inflation rate at 2%—the Federal Reserve's target—indicated healthy spending and productivity gains without exacerbating inflationary pressures.
Solid economic growth will have a positive impact on the consumer discretionary and retail sectors, which attract a major portion of consumer spending. The underlying S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The fund charges 35 bps in fees.
A rise in activity in the economy and the resultant uptick in business investments will fuel growth in the industrial sector, which makes IYJ appealing. The underlying Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index measures the performance of the industrial sector of the U.S. equity market. It includes: construction & materials, aerospace & defense, general industrials, electronic & electrical equipment, industrial engineering, industrial transportation & support services. The Index is capitalization-weighted. The fund charges 40 bps in fees.
Rebounding residential investment will benefit the real estate sector.A contained inflation level should lead the Fed to hold on to its interest rate policy. The underlying Dow Jones U.S. Select REIT Index provides a measure of real estate securities that serve as proxies for direct real estate investing, in part by excluding securities whose value is not always closely tied to the value of the underlying real estate. The fund charges 25 bps in fees and yields 3.90% annually.
A robust economy can lead to more investments and financial activities. The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to about 70 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It charges investors 10 bps in fees per year.
Small-cap stocks generally lead the way higher on improving American economic health as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market.VBK, which tracks the CRSP US Small Cap Growth Index, appears to be an excellent choice.
The underlying CRSP U.S. Small Cap Growth Index measures the investment return of small-capitalization growth stocks. The fund charges 7 bps in fees.
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U.S. GDP Growth Beats Expectations in Q4: ETFs to Benefit
The U.S. economy exhibited a robust performance in the fourth quarter of 2023, with the real Gross Domestic Product (GDP) expanding at an annualized rate of 3.3%, according to the Bureau of Economic Analysis' (BEA) initial estimate. This growth exceeded market expectations of 2% and followed a 4.9% increase in the third quarter.
That said, some specific areas of the ETF industry will likely benefit from solid GDP numbers. ETFs like SPDR S&P Retail ETF (XRT - Free Report) , iShares U.S. Industrials ETF (IYJ - Free Report) , SPDR Dow Jones REIT ETF (RWR - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) and Vanguard Small-Cap Growth ETF (VBK - Free Report) are expected to outperform.
GDP Price Index and Core PCE
The report detailed that the Gross Domestic Product Price Index was recorded at 1.5% in the fourth quarter, a decrease from the previous quarter's 3.3%. Additionally, the Core Personal Consumption Expenditures (PCE) Price Index maintained a steady rise of 2% on a quarterly basis, aligning with prior quarter figures and market predictions.
Positive Outlook on Economic Growth
U.S. Treasury Secretary Janet Yellen expressed optimism regarding the fourth quarter's economic growth. She emphasized that the strong growth, coupled with a core inflation rate at 2%—the Federal Reserve's target—indicated healthy spending and productivity gains without exacerbating inflationary pressures.
ETFs to Benefit
SPDR S&P Retail ETF (XRT - Free Report) ) – Zacks Rank #2 (Buy)
Solid economic growth will have a positive impact on the consumer discretionary and retail sectors, which attract a major portion of consumer spending. The underlying S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The fund charges 35 bps in fees.
iShares U.S. Industrials ETF (IYJ - Free Report) ) – Zacks Rank #2
A rise in activity in the economy and the resultant uptick in business investments will fuel growth in the industrial sector, which makes IYJ appealing. The underlying Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index measures the performance of the industrial sector of the U.S. equity market. It includes: construction & materials, aerospace & defense, general industrials, electronic & electrical equipment, industrial engineering, industrial transportation & support services. The Index is capitalization-weighted. The fund charges 40 bps in fees.
SPDR Dow Jones REIT ETF (RWR - Free Report) ) – Zacks Rank #2
Rebounding residential investment will benefit the real estate sector.A contained inflation level should lead the Fed to hold on to its interest rate policy. The underlying Dow Jones U.S. Select REIT Index provides a measure of real estate securities that serve as proxies for direct real estate investing, in part by excluding securities whose value is not always closely tied to the value of the underlying real estate. The fund charges 25 bps in fees and yields 3.90% annually.
Financial Select Sector SPDR Fund (XLF - Free Report) ) – Zacks Rank #1 (Strong Buy)
A robust economy can lead to more investments and financial activities. The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to about 70 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It charges investors 10 bps in fees per year.
Vanguard Small-Cap Growth ETF (VBK - Free Report) ) – Zacks Rank #1
Small-cap stocks generally lead the way higher on improving American economic health as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market.VBK, which tracks the CRSP US Small Cap Growth Index, appears to be an excellent choice.
The underlying CRSP U.S. Small Cap Growth Index measures the investment return of small-capitalization growth stocks. The fund charges 7 bps in fees.