The month of October will be highlighted by a deluge of earnings, rising rate worries and the onset of the holiday season. As per the Earnings Trends issued on Oct 3, 2018, earnings growth of the S&P 500 in Q3 is expected to be 17.9% on 7.3% higher revenues.
The economic front looks upbeat barring some occasional drop-offs in economic readings. The broader market has seen a mixed start to October with rising rate worries. Against this backdrop, it is important to pin point ETFs that could be profitable in October.
SPDR S&P Retail ETF (XRT - Free Report)
With the economy improving, consumers are likely to splurge on Halloween shopping. Per the National Retail Federation’s annual survey conducted by Prosper Insights & Analytics, total Halloween spending is likely to touch $9 billion, the second highest on record. The figure is more-or-less the same as last year’s $9.1 billion. NRF CEO said that shelves of stores are filling fast with supplies for “children, pets and adults with their favorite decorations, candy and costumes for the season.”
iShares Transportation Average ETF (IYT - Free Report)
As per the source, Dow Jones Transportation index enjoys a seasonal tailwind in October. Plus, the transportation sector is expected to witness earnings growth of 20.9% (fifth highest among the 16 Zacks classified S&P 500 sector) in the ongoing reporting cycle and is expected to log 22.7% growth in the fourth quarter (read: Transport ETFs Riding High on Solid Q2 Earnings).
If oil prices remain low on an apparent Saudi-Russia deal to boost output (in order to make up for the Iranian output loss amid U.S. sanctions), the transportation sector will be benefited. This is especially true as energy costs form a major portion of the overall costs of this sector.
WisdomTree Negative Duration US Aggregate Bond ETF (AGND - Free Report)
Since rising rate worries are prevalent in the United States, investors can bet on a negative duration bond ETF like AGND. The fund provides long exposure to the Bloomberg Barclays U.S. Aggregate Bond Index while seeking to manage interest rate risk through the use of short positions in U.S. Treasury securities (read: ETF Strategies to Play the 7-Year High Benchmark Yield).
Vanguard Dividend Appreciation ETF (VIG - Free Report)
Dividend aristocrats are bets that could safeguard investors from any sudden market swing. The underlying index of the fund consists of common stocks of companies that have a record of increasing dividends over time. This calls for a quality and safe exposure in turbulent times.
These companies generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. Additionally, aristocrats tend to skew the portfolio to less volatile sectors and mature companies (read: An Investor's Guide to Dividend Aristocrat ETFs).
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