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Scared of a September Lull? Play 6 ETFs

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After exiting a superb August, investors must have shifted focus to the likely market upheaval in September. This is especially true given its ill-famed seasonality in the equity market.

September is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2017 has revealed that September ended up offering positive returns in 30 years and negative returns in 38 years, with an average return of negative 0.64%, which is worse than any month.

Terrifying financial events like the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008 all crept up in the month of September. This September is no different with trade tensions flaring up between the United States and other countries like China and Canada. The Fed is also expected to enact another rate hike this month. All these make it more important to pin point ETFs that have the power to navigate such threats.

First Trust Small Cap Growth AlphaDEX Fund (FYC - Free Report)

U.S. economic growth for Q2 came in a bit stronger than initially estimated. GDP grew 4.2% on an annualized rate, up from the 4.1% previous record. This was the fastest rate since Q3 of 2014. Such an upbeat economy and U.S.-Sino trade war tensions should continue to drive small-caps higher.

Investors should note that small-cap stocks are likely to do better in a rising rate environment (which currently the case is) since these are tied more to domestic activities and thus not hurt by a rising dollar. Economic wellbeing in the domestic land is also a major positive for small-cap stocks (read: Small-Caps Rule in August: Top-Performing ETFs).

ETFMG Alternative Harvest ETF (MJ - Free Report)

The craze for marijuana investing has been pretty high thanks to Canada’s legalization of recreational marijuana starting Oct 17, 2018. The country’s cannabis industry has been on a tear as renowned global beverage companies are taking interest in it. We expect the momentum to stay strong in September too (read: Pot Stocks Are on a High: Play These Cannabis ETFs).

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)

A lot of factors are favoring this sector. An 18-year high consumer confidence level, benefits of a tax reform and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector performs well in a rising rate environment. One of the key holdings of the fund is on its way to touch $1-trillion market cap as its shares topped $2,000 for the first time last month. All these make XLY better positioned (read: 5 ETFs to Buy as Consumer Confidence Surges to 18-Year High).

Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report)

The healthcare sector enjoys seasonal benefits in the month. And one high-growth corners of the broader healthcare segment – biotech – historically has done well during late June to early October, per equityclock.com. The biotech space has picked up momentum lately on compelling valuation, prospects of easing regulations, ebbing threats related to the price gouging issue and several successful clinical trials.

iShares S&P Moderate Allocation Fund AOM

We would also like to pick a full-fledged defensive ETF like AOM. The fund takes a fund-of-funds approach and is a combination of bonds and global stocks. Fixed income makes up about 59.5% of the fund followed by 40.1% in equities. The United States accounts for about 63.6% of the portfolio, while Japan (4.7%) and the U.K. (3.6%) take the next two spots.

JPMorgan Managed Futures Strategy ETF (JPMF - Free Report)

The fund deploys a rules-based, bottom-up approach for constructing a diversified portfolio of managed futures strategies. The fund looks to provide long-term total returns by investing globally to tap opportunities across a broad range of asset classes. No asset occupies more than 0.72% of the fund.

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