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Best ETF Strategies for Q4 & Tech Reshuffle

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  • (1:00) - Current Market Outlook For Q4
  • (3:45) - Will XSW and XHE Continue To Outperform
  • (7:00) - What Are The Major Impacts From The Reclassification
  • (12:15) - ETF Strategies For Q4
  • (15:00) - Changes In Consumer Discretionary
  • (17:05) - Episode Roundup: Podcast@Zacks.com

 

In this episode of ETF Spotlight Podcast, I talked with Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors.

First off, we discussed what’s happening in the markets. There is no shortage of factors to worry about now--rising rates, trade tensions, China’s slowdown, possible sanctions on Saudi Arabia, valuations and the looming mid-term elections.

Mathew pointed out that we might be nearing a peak in earnings but earnings growth still remains robust in US whereas earnings revisions have turned negative outside the US.  He still likes US equities, Healthcare and Technology sectors in particular, but mid-terms have added another element of uncertainty.

A split Congress appears more likely now, and in case Democrats retake one or more chambers, we could see more focus on healthcare reform and environmental regulation.

We also discussed some of the top performing SPDR ETFs of 2018—the SPDR S&P Internet ETF (XWEB - Free Report) , the SPDR S&P Health Care Equipment ETF (XHE - Free Report) and the SPDR S&P Software & Services ETF (XSW - Free Report) —that have gained 31%, 29% and 21% respectively this year. Can these ETFs continue to outperform?

State Street has partnered with Kensho—a leading data analytics firm--to develop a suite of ETFs that invest in companies driving the technological shifts of the modern economy. These include the SPDR Kensho Intelligent Structures ETF XKII, the SPDR Kensho Future Security ETF (XKFS - Free Report) and the SPDR Kensho Smart Mobility ETF XKST.

We also talked about recent GICS reshuffle. 26 stocks, representing about 10% of the market cap of the S&P 500 Index, were reclassified last month. These included high-profile names like Google’s parent Alphabet (GOOGL - Free Report) , Facebook (FB - Free Report) and Netflix (NFLX - Free Report) that are now housed in the new Communication Services sector.

With the reshuffling, Apple (AAPL - Free Report) and Microsoft (MSFT - Free Report) will get more representation in tech ETFs like the Technology Select Sector SPDR Fund (XLK - Free Report) while Amazon’s (AMZN - Free Report) weight will go up further in consumer discretionary ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) .

Please tune in to the podcast to learn why investors should reallocate some portion of their Technology and Consumer Discretionary positions into the new Communication Services sector. The new Communication Services Select Sector SPDR Fund (XLC) is home to some high-growth names that are trading at reasonable valuations. In fact, 61% of its constituents are classified as “growth” stocks.

The good news for investors is that there would likely be no tax consequences due to GICS changes. 

To learn more about SPDR ETFs, please visit us.spdrs.com.

Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email podcast@zacks.com.

 



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