The mood in Wall Street has remained chiefly tense this week as well. The Dow Jones Industrial Average is down 0.7% this week. The other two broad market indices, the S&P 500 and the Nasdaq Composite, have declined about 0.4% and 0.7%, respectively, in the same period.
The omicron strain has entered the United States, with the second case getting reported by a Minnesota resident. The Centers for Disease Control and Prevention’s confirmation of the first case of omicron in California had already led to a new wave of worries on Dec 1. The new variant is feared to be carrying the combined features of the previous variants and can have high transmissibility and lower vaccine potency.
Federal Reserve Chair Jerome Powell has also adversely impacted market sentiments by mentioning that the central bank will be discussing speeding up the tapering process from the $15 billion-a-month schedule decided previously, per a CNBC article. This move might be taken to control the persistently high inflation levels, given that the U.S. economy is strongly recovering from the pandemic-led slump.
The rising cases due to the new variant have spooked investors. They fear that implementing new lockdown measures to control the spread may hurt the global economic recovery achieved so far,following the reopening of economies. However, some market analysts are anticipating a market rally in December. According to Bank of America (NYSE:BAC), the S&P 500 index has increased 2.3% on average since 1936 and remained positive 79% of the time in December, as mentioned in a CNBC article.
Thus, considering the complexities of the current market scenario, let’s take a look at some ETF areas that can make good investment choices:
Healthcare ETFs
The pandemic has triggered a race to introduce vaccines and treatment options, opening up investment 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 omicron 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) (read: Wall Street Still Has Room to Run: ETFs to Play).
Retail ETFs
Retailers have adequately prepared for the holiday season (the late October-December period) that is considered a busy season for many industry players and market participants. The quarter is also marked by some popular retail events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas, which increase its significance among retailers. According to the National Retail Federation (NRF), holiday season sales in 2021are projected to surpass all records during November and December and rise 8.5-10.5% year over year to between $843.4 billion and $859 billion. Holiday sales increased 8.2% in 2020 to hit a record of $770 billion.
Also, studying Mastercard (NYSE:MA) SpendingPulse data, U.S. retail sales— excluding automotive and gas — for the “75 Days of Christmas” from Oct 11 to Dec 24 are anticipated to increase 6.8% from the year-earlier figure.
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: 5 ETFs to Benefit From a Likely Record Cyber Week Sales).
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 compared 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-averse 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: Take Shelter in Dividend Aristocrat ETFs as COVID-19 Cases Rise).
COVID-19 Themed ETFs
It looks like the remainder of 2021 will continue to bear the brunt of the pandemic, before the majority of Americans get vaccinated. Therefore, a COVID-themed ETF could be a smart pick. Investors who wish to ride the rally from the increased preference for COVID-themed ETFs can consider Direxion Work From Home ETF WFH, Global X Telemedicine & Digital Health ETF EDOC,Global X Education ETF (EDUT), Pacer BioThreat Strategy ETF (VIRS) and ETFMG Treatments Testing and Advancements ETF (GERM) (read: ETF Areas to Gain/Lose on Fear of Omicron Strain of Coronavirus).
Cloud Computing ETFs
Cloud computing and storage are expected to stay in vogue in 2021. The space has received quite a push amid the coronavirus outbreak, with a vast population working from home across the globe. Even amid the accelerated coronavirus vaccine rollout globally, demand for cloud computing is set to stay robust even after the pandemic. It is worth knowing here that cloud computing and storage have found applications in social networking, messaging apps and streaming services. It has empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. Cloud computing also supports organizations in remotely processing a lot of information and developing and running key applications and services.
Here we highlight some ETFs that can gain from the growing demand for cloud computing -- First Trust Cloud Computing ETF SKYY, Global X Cloud Computing ETF CLOU, WisdomTree Cloud Computing ETF (WCLD) and Wedbush ETFMG Global Cloud Technology ETF (IVES) (read: Play These 5 ETFs Amid Rising Omicron Variant Worries).
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
Health Care Select Sector SPDR ETF (NYSE:XLV): ETF Research Reports
Vanguard Health Care ETF (VHT): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
SPDR S&P Dividend ETF (SDY): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Global X Cloud Computing ETF (CLOU): ETF Research Reports
Direxion Work From Home ETF (WFH): ETF Research Reports
Global X Telemedicine & Digital Health ETF (EDOC): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research