This year has been pretty decent for Wall Street with the S&P 500 adding about 20% despite trade tensions between the United States and several other countries, mainly China, slowdown in developed economies, geopolitical woes and Brexit.
However, the fourth quarter draws the maximum investor attention as festivities during this period generate huge business for many industries.Chances of more dovishness from the Fed and a likely U.S.-China trade deal (though partial) could be encouraging developements this fourth quarter.
“Over the past three decades back to 1989, the Dow (4.3%), S&P (3.6%) and Nasdaq (4.7%) all show gains in the fourth quarter, according to Kensho, and trade positive 75%–80% of the time,” per CNBC.
In this light, we highlight a few top-ranked sectors and related ETFs.
Aerospace – Rank #1
The Industrial sector has been one of the top performers of the fourth quarter over the last 10 years with an average return of around 6%, per CNBC. However, given the slowdown in the U.S. manufacturing sector, it is better to take a look at the specialized corner of the industrial sector — aerospace and defense. SPDR S&P Aerospace & Defense (NYSE:XAR) ETF (LON:XAR) , a Zack Rank #2 (Buy) ETF, is a good pick here (read: Trump May See Easy "Win in 2020:" ETFs to Bet On).
Construction – Rank #2
The Construction sector thrives in a low-rate environment. Though home sales have not been great of late, the U.S. homebuilders sentiment data for October is upbeat. The metric has hit the highest level since February 2018. The boost in confidence level in October can be due to a drop in mortgage rates in September. iShares U.S. Home Construction ETF (WA:ITB) , which has a Zacks Rank #3 (Hold), can thus be tapped (read: ETFs to Gain as Homebuilders Sentiment Continues to Rise).
Medical – Rank #3
The broader healthcare sector gains even if there is an economic slowdown. Plus, its specialized corner — biotech — is high-growth in nature. The biotech sector gets benefited from FDA approvals and solid study data. Recently, Biogen (NASDAQ:BIIB) said that it is seeking regulatory approval for its Alzheimer’s drug, aducanumab, even after it stopped testing the treatment. The news acted as a corner for the entire space. Health Care Select Sector SPDR Fund XLV, a Zacks Rank #2 (Buy) ETF, can easily be tapped (read: What's in Store for Healthcare ETFs in Q3 Earnings?).
Utilities – Rank #4
Low-rate environment and utilities go hand in hand. Plus, the U.S. utilities sector is thriving on several developments. One of the most significant developments in the space is the “awareness of energy efficiency programs, and implementation of the same in residential and commercial buildings and industrial plants.” Utilities Select Sector SPDR Fund XLU is a good buy in this regard (read: Tap Revenue Growth With These ETFs & Dump Earnings Recession).
Retail – Rank #5
Investors should also note that the late October-December period embraces the key holiday season, which puts the spotlight on the performance of retailers. As a series of sales-boosting events — Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas — fall in this quartile, the sector generally sees a sales boost. Deloitte expects sales to increase between 4.5% and 5% from a year ago. SPDR S&P Retail (NYSE:XRT) ETF XRT has a Zacks ETF Rank #2 (read: Is the Retail Picture Truly Gloomy? ETFs in Focus).
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iShares U.S. Home Construction ETF (ITB): ETF Research Reports
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
Utilities Select Sector SPDR Fund (XLU): ETF Research Reports
Health Care Select Sector SPDR Fund (XLV): ETF Research Reports
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Zacks Investment Research