The Fed’s minutes from its July 28-29 meeting have put investors on edge, leaving them worried over the impact of the ongoing health crisis on the U.S. economy. This resulted in broader indices like the S&P 500 and Nasdaq Composite lose 0.4% and 0.6% on Aug 19, respectively.
The officials at the meeting were visibly worried about the pandemic that poses severe threats to the economic outlook over the medium term, per a CNBC article. They are also concerned about the adverse impact of the coronavirus outbreak on the economic activities, employment and inflations levels in the near term.
Further, Fed is also waiting for the new coronavirus relief package as it strongly believes that another stimulus package is needed to fight the pandemic-induced economic slowdown. In this regard, Quincy Krosby, chief market strategist at Prudential Financial (NYSE:PRU) said that the minutes “underscored the need for a fiscal package,” per a CNBC article. The new stimulus package is expected to expand the jobless bonus to $400 per week, provide a payroll tax holiday for Americans making below $100,000 per year and defer student loan payments this year.
At the same time, the central bank officials are also worried about the rising public debt of the federal government, which is now $26.6 trillion in debt, per a CNBC article. They also fear that the increasing issuance of Treasury can disturb market functioning. However, the Federal Reserve officials currently hold the overnight borrowing rate in a range of 0-0.25%.
Against this backdrop, let’s look at some ETF areas that will continue to be strong investing options:
Biotech ETFs
The race to introduce vaccine and treatment of coronavirus is breeding opportunities, making the biotech sector a prospective space for investments. From vaccine-related positive news to progress in the development of cell therapies for addressing coronavirus, all kept the sector surging.
Favorable updates on two vaccine candidates being devloped by Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE), in collaboration with German biotech firm BioNTech, have come to the fore. These companies have begun the late-stage study on their coronavirus vaccines. Other vaccine developers that are being supported by the Operation Warp Speed are also nearing the late-stage trials. This includes an experimental vaccine being developed in collaboration with the University of Oxford and AstraZeneca (NYSE:AZN), a vaccine candidate from Johnson & Johnson (NYSE:JNJ), and another from the biotechnology company Novavax (NASDAQ:NVAX), per The Washington Post article.
Notably, a few ETFs with considerable exposure to the biotech space are iShares Nasdaq Biotechnology ETF IBB, SPDR S&P Biotech (NYSE:XBI) ETF XBI, First Trust Amex Biotechnology Index (FBT), ARK Genomic Revolution ETF (ARKG) and VanEck Vectors Biotech ETF (BBH) (read: Moderna ETFs to Shine on U.S. Contracts for Coronavirus Vaccine).
Internet ETFs
The second half of 2020 is expected to keep bearing the brunt of the pandemic as its second wave is gathering steam. In the present scenario, the rising work-from-home and online-shopping trends, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With these new trends gaining momentum, internet will be a major requirement in daily lives.
More and more people are spending time indoors, in line with social-distancing guidelines due to the pandemic. Most surveys found that people are more interested in online shopping rather than visiting a brick-and-mortar store for purchases of essential food items and supplies now. It has also been observed that the pandemic-induced shutdown boosted demand for video games.
Against this backdrop, let’s look at some internet ETFs that will consistently gain traction from the spurt in demand for online gaming, shopping, video streaming and remote-working trends owing to the coronavirus crisis: First Trust Dow Jones InternetIndex FDN, ARK Next Generation Internet ETF ARKW, Invesco NASDAQ Internet ETF (PNQI), O’Shares Global Internet Giants ETF (OGIG) and Global X Internet of Things ETF (SNSR).
Cloud Computing ETFs
In the current environment, people are trying to maintain safe physical distancing and are working remotely. Large employers like Twitter (TWTR) and Facebook (NASDAQ:FB) have allowed their employees to work from home. Cloud computing has emerged as a key technology in the fight against the coronavirus crisis. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working. The work-from-home model has already bumped up sales of PCs, laptops and other kind of computer peripherals.
Against this backdrop, investors can look at the following ETFs that can gain from the remote-working trend. These are First Trust Cloud Computing ETF SKYY and Global X Cloud Computing ETF CLOU (read: 5 ETF Areas Hitting Highs on Resurging Coronavirus Cases).
AI, Robotics & Cyber Security
We are living in an era largely dominated by AI applications and technological advancements. Revolutionary technologies like AI, ML and IoT are fast changing the business landscape by expanding opportunities, growing revenues and enhancing efficiencies.
The robotics market is flooded with opportunities as robots are being used for jobs, such as sanitizing hospitals, homes and workplaces, along with monitoring, surveying, handling, and delivering food and medicines.
Nevertheless, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. Per a Grand View Research report, the global cyber-security market is expected to reach a worth of $241.1 billion, at a CAGR of 11%, from 2019 to 2025. Accordingly, our investors can consider Global X Robotics & Artificial Intelligence ETF BOTZ, First Trust Nasdaq Artificial Intelligence and Robotics ETF ROBT, ROBO Global Robotics & Automation ETF ROBO, iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), First Trust NASDAQ CEA Cybersecurity ETF (CIBR) and ETFMG Prime Cyber Security ETF (HACK) (read: Try These ETF Areas in Virus-Impacted Second Half of 2020).
Sustainable Investing ETFs
The coronavirus outbreak has directed invetors’ attention toward conscious investing, driving demand for environmental, social and governance (ESG) funds. Going by Morningstar Direct’s data, investors spent at least $12.2 billion on ESG funds in the first four months of 2020, per The Wall Street Journal report. Rising awareness of ESG funds among companies marked by continued technological advancement and digital revolution has been closely observed since the pre-pandemic era.
Remarkably, ESG investing has shown some resilience and continues to gain investor attention amid the pandemic. The Wall Street Journal’s report also highlights the resilience of ESG funds, which mostly generated better-than-average returns in comparison to the broader S&P 500 Index.
To gain exposure to ESG investments, investors can consider iShares ESG MSCI USA ETF ESGU, Xtrackers MSCI USA ESG Leaders Equity ETF USSG, Vanguard ESG U.S. Stock ETF (ESGV) and Nuveen ESG Large-Cap Growth ETF (NULG) (read: State Street (NYSE:STT) Debuts S&P 500 ESG ETF Amid High ESG Fund Demand).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares Nasdaq Biotechnology ETF (IBB): ETF Research Reports
SPDR SP Biotech ETF (XBI): ETF Research Reports
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
Global X Robotics Artificial Intelligence ETF (BOTZ): ETF Research Reports
ROBO Global Robotics and Automation Index ETF (ROBO): ETF Research Reports
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
iShares ESG MSCI USA ETF (ESGU): ETF Research Reports
First Trust NASDAQ Artificial Intelligence and Robotics ETF (ROBT): ETF Research Reports
Global X Cloud Computing ETF (CLOU): ETF Research Reports
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report