Back to top

Image: Bigstock

Sector ETFs for Q3

Read MoreHide Full Article

With the Q2 earnings season in full throttle, broader U.S. indices in the bull territory and global market worries still in place thanks to Brexit, investors might be interested in knowing the best sector picks at the current level.

To add to this, the Fed is still being dovish this year after the liftoff in December, but may tighten policies ahead if the U.S. economy continues to gain momentum. However, the Fed noted that the present U.S. economic recovery is modest and that it will closely follow the impact of Brexit on global economy before hurrying up on further rate hike. To put a long story short, speculation over the next Fed hike will continue to baffle investors. 

We also have the presidential election in November, which may leave a huge impact on market sentiments. Against this backdrop, we highlight three lucrative sectors (as per the Zacks Market Strategy issued on July 14, 2016) and the related ETFs. These could also be used to book some profits in the present edgy scenario, threatened by global issues and ambiguity over the rate hike timeline at home.

Each offer is intriguing enough to fight any sudden emergence of negative economic news as these sector choices are based on the Zacks Ranking System.

Health Care

Health care has been a subdued segment so far this year being caught in a web of issues. While Democratic Presidential Candidate Hillary Clinton’s allegations on “price gouging” hit the pharma stocks, overvaluation concerns wrecked havoc on biotech ETFs (read: ETFs to Watch If Hillary Clinton Wins the Presidency).

However, after such steep sell-offs, especially in the biotech space, the space seems to have returned to reasonable valuation. Plus, several merger and acquisitions and Affordable Care Act are to drive the sector ahead.

Also, as per the Zacks Market Strategy, Health Care was among the sectors which have generated considerable free cash flows. If this was not enough, the broader health care space is known to be defensive in nature, protecting from downside risks.

John Hancock Multifactor Healthcare ETF, SPDR S&P Pharmaceuticals ETF (XPH - Free Report) and BioShares Biotechnology Clinical Trials Fund (BBC - Free Report) are some of the good choices for the space.


This is yet another high-potential area for investors who are eyeing near-term gains. Within the broader tech space, semiconductor, the value-centric traditional tech area, is taking an upper hand in the still-edgy investing backdrop. This tech sub-sector might see gains ahead on demand for its products in emerging technology applications like tablets and smartphones despite still-subdued PC shipments (read: Why Semiconductor ETFs Are Hitting Highs).

Though the world semiconductor market will see a year-over-year decline of 2.4% in 2016, it is likely to enter into the growth territory in 2017 and 2018, as per World Semiconductor Trade (WSTS).

SPDR S&P Semiconductor ETF (XSD - Free Report) ,iShares PHLX Semiconductor ETF (PSI - Free Report) and VanEck Vectors Semiconductor ETF (SMH - Free Report) can prove to be good choices.

Consumer Staples

The consumer staples sector has been an area to watch lately. It acts a defensive sector and can offer a great deal of protection to your portfolio in a wild market. Additionally, still-cheaper energy prices, stepped-up economic activities, a recovering housing market, and a decent labor market – as indicated by the recent data – are making the consumer segment a great place to stay invested in.

PowerShares S&P Small-Cap Consumer Staples Portfolio ETF(PSCC - Free Report) , First Trust Consumer Staples AlphaDEX Fund (FXG - Free Report) and Vanguard Consumer Staples ETF (VDC - Free Report) are some of the intriguing choices (read: Are Boring ETFs the Best Bet This Season?).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Published in