Wall Street is witnessing a tough time in the historically weak month of September. The Dow Jones Industrial Average has fallen 4%, whereas the S&P 500 has lost 3.7% in the month. Not just the reputation of the month, there are other factors like uncertainty surrounding the Fed’s decision, several weak economic data releases, concerns about rising COVID-19 cases and the approaching winter season, a large chunk of unvaccinated population, possibilities of high corporate tax rates, China property market concerns along with inflation pressure that have been keeping investors on the edge.
Investors are waiting for the minutes from the Fed’s two-day policy meeting that began on Sep 21. They are concerned about the Fed’s chances of tapering the fiscal stimulus support, which includes the $120 billion a month bond-buying program. Several economic data releases are also weighing on investors’ minds.
Amid the market uncertainty, we have highlighted some ETF areas that can be good investment options for market participants amid the September chaos:
Healthcare ETFs
The pandemic has triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the healthcare sector. Moreover, the space has been gaining increasing attention lately, largely due to the resurgence in COVID-19 infections due to the Delta variant. This has made investors jittery, compelling them to shift toward defensive investments.
Considering the current market situation, investors can consider The Health Care Select Sector SPDR Fund XLV, Vanguard Health Care ETF VHT, iShares U.S. Healthcare ETF IYH and Fidelity MSCI Health Care Index ETF (FHLC).
Retail ETFs
The latest retail sales data has pleasantly surprised investors. The metric rose 0.7% sequentially in August 2021 against market expectations of a 0.8% decline, per a CNBC article. Online retail sales rose 5.3% last month after declining 4.6% in July, per a Reuters article. There was a rise in sales at clothing stores as well as building material and furniture in the previous month. Encouragingly, the core retail sales rebounded 2.5% in August from a downwardly revised drop of 1.9% in July, according to the Reuters article. Importantly, the metric highlights the spending component of GDP.
Going on, market analysts expect impressive retail sales in 2021 along with a strong holiday season. The strength in consumer sentiment can be the major driving force as they are believed to be prepared to splurge this holiday season after facing strict restrictions for more than a year and have gathered enough resources.
Considering the strong trends, investors may park their money in the following retail ETFs to tap the sales boom -- SPDR S&P Retail ETF XRT, Amplify Online Retail ETF IBUY, VanEck Retail ETF RTH and ProShares Online Retail ETF (ONLN) (read: ETFs to Win & Lose as Delta Variant Cases Surge).
Housing ETFs
The U.S. housing sector saw a bright spot with strength in housing demand and declining lumber prices. However, headwinds like increasing construction costs and continued material supply-chain worries along with rising home prices remain. These factors took a toll on builder confidence, which declined for three months. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment for the newly-built single-family homes rose a point to 76 in September from 75 in August, 80 in July, 81 in June and 30 in April (the lowest since June 2012). The reading looks strong as any number above 50 signals at improving confidence.
Against such a backdrop, here are a few housing ETFs like iShares U.S. Home Construction ETF ITB, SPDR S&P Homebuilders ETF XHB, Invesco Dynamic Building & Construction ETF (PKB) and Hoya Capital Housing ETF (HOMZ) (read: Forget Bubble Fear: Bet on Housing ETFs).
Dividend ETFs
Dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities in comparison to other products in the space but might not necessarily have the highest yields.
‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Notably, the inclination toward dividend investing has been rising due to easing monetary policy on the global front, and market uncertainty triggered by the pandemic and deceleration in global growth.
These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver a nice combination of annual dividend growth and capital-appreciation opportunities and are mostly good for risk adverse long-term investors.
Against this backdrop, let’s take a look at some ETFs that investors can consider like Vanguard Dividend Appreciation ETF VIG, SPDR S&P Dividend ETF SDY, iShares Select Dividend ETF DVY and ProShares S&P 500 Dividend Aristocrats ETF (NOBL) (read: Tax Hike Worries Drive Last Week's Inflows: 5 Hot ETFs).
Low Volatility ETFs
Demand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer more protection than the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options -- iShares Edge MSCI Min Vol USA ETF USMV, Invesco S&P 500 Low Volatility ETF SPLV, iShares Edge MSCI EAFE Minimum Volatility ETF EFAV, iShares Edge MSCI Min Vol Global ETF (ACWV), Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: Growth Concerns to Drive Demand for Low-Volatility ETFs).
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Health Care Select Sector SPDR ETF (NYSE:XLV): ETF Research Reports
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
Vanguard Health Care ETF (VHT): ETF Research Reports
SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
iShares U.S. Home Construction ETF (ITB): ETF Research Reports
SPDR S&P Dividend ETF (SDY): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares Select Dividend ETF (DVY): ETF Research Reports
iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
iShares MSCI EAFE Min Vol Factor ETF (EFAV): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
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