May was decent for stocks, mainly due to the gradual reopening of economies globally from the coronavirus-led lockdowns and rising hopes for vaccines. And June looks even brighter. The month started nicely on Wall Street despite a civil unrest in America. U.S. manufacturing, consumer confidence and some housing data came in less scary and indicate chanes of a speedy recovery. Meanwhile, efforts for drug and vaccine developments for COVID-19 are ramping up.
Notably, June is not known for good returns. A consensus carried out from 1950 to 2019 shows that June ended up offering positive stock returns in 36 years and negative returns in 34 years, per moneychimp.com, with an average positive return of 0.03%.
But this year, the investing and stimulus (both government and the Fed) backdrop is totally different. Global economies and corporates will leave no stone unturned to register a fast rebound from the COVID-19 slump.
Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month. The below-mentioned ETFs have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
S&P 500 – Vanguard SP 500 ETF VOO
If you are unnerved by the single stock-picking approach in the current recessionary environment, you can simply bet on the S&P 500 through a low-cost option like VOO.Warren Buffett is also a proponent of low-cost index fund investing. The average annualized total return for the S&P 500 index over the past 90 years is around 10% before adjusting for inflation and the index gives exposure to 80% of the U.S. market cap, per financial veterans. It yields about 1.88% annually and charges only 3 bps in fees. The fund has a Zacks Rank #2.
Dividend – Vanguard High Dividend Yield ETF VYM
The underlying FTSE High Dividend Yield Index which is consists of common stocks of companies that pay out dividends that generally are higher than average.Dividend stocks often beat their non-dividend paying counterparts amid market uncertainty. Stocks with high dividend point to quality investing — a pre-requisite to making money in a volatile environment. Even if there is capital loss, dividend payments make up for it to a large extent. Moreover, at the record-low yield environment, Zacks Rank #2 VYM offers a juicy 3.42% yield annually (read: Guide to 10 Most Popular Dividend ETFs).
Communication – Communication Services Select Sector SPDR ETF XLC
The Zacks Rank #1 fund provides an effective representation of the communication services sector of the S&P 500 Index. The COVID-19 outbreak brightened the appeal for the work-and-learn-from-home culture. With exponential growth in video and other bandwidth-intensive applications owing to the mass adoption of smartphones and increased deployment of 5G technology, the communication industry is to set to rule irrespective of the pandemic. The fund is heavy on the likes of Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL), T-Mobile, Comcast (NASDAQ:CMCSA) and Verizon (NYSE:VZ).
Small-Caps – iShares SP SmallCap 600 Growth ETF IJT
Massive Fed and government pandemic stimulus added fuel to the small-cap rally past month. Reopening of economies and the relative previous underperformance compared to the large caps, should add more strength ahead. Investors thus can bet on this Zacks Rank #1 fund (read: Small-Cap Earnings Picture: 5 Sector ETF Stars).
Financials – Vanguard Financials ETF VFH
This has been a beaten-down space amid pandemic. However, with easing social distancing restrictions and the return of risk-on trade sentiments, long-term bond yields should jump higher in the near term. This should benefit financial stocks that perform well in a rising rate environment. The fund has a Zacks Rank #2.
Corn – Teucrium Corn ETF CORN
The underlying CBOT Corn Futures Contract looks to reflect the daily changes of a weighted average of the closing prices for three futures contracts for corn that are traded on the CBOT. The fund has a Zacks Rank #1, right now. The likelihood of China’s accomplishment of phase-one trade deal which promises buying of corn, the agricultural commodity’s usage in ethanol production and reopening of economies should favor the crop.
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iShares SP SmallCap 600 Growth ETF (IJT): ETF Research Reports
Teucrium Corn ETF (CORN): ETF Research Reports
Vanguard SP 500 ETF (VOO): ETF Research Reports
Vanguard Financials ETF (VFH): ETF Research Reports
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
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