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The Zacks Analyst Blog Highlights Financial Select Sector SPDR Fund, Vanguard Consumer Discretionary ETF, Invesco DWA Industrials Momentum ETF, iShares Floating Rate Bond ETF and SPDR Bloomberg 1-3 Month T-Bill ETF
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For Immediate Release
Chicago, IL – June 26, 2023 – Zacks.com announces the list of stocks and ETFs featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: Financial Select Sector SPDR Fund (XLF - Free Report) , Vanguard Consumer Discretionary ETF (VCR - Free Report) , Invesco DWA Industrials Momentum ETF (PRN - Free Report) , iShares Floating Rate Bond ETF (FLOT - Free Report) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) .
Here are highlights from Friday’s Analyst Blog:
5 ETF Zones Primes for 2023 Growth Amid Rate-Hike Prospects
The Federal Reserve, in its latest meeting, kept the rates unchanged after raising them for the 10th consecutive time to combat elevated inflation. However, the central bank maintained its hawkish stance, indicating another rate hike in the near future.
Powell stated that "inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go." Inflation has moderated since the middle of last year with the Fed's preferred measure of inflation falling substantially from a peak of around 7% last year to 4.4% as of April.
Following last week’s two-day FOMC meeting, officials indicated there could be two more quarter-percentage-point increases this year. The Fed’s benchmark borrowing rate is currently pegged in a range between 5% and 5.25% (read: Fed to Hike Rates Further: ETFs to Buy).
Given the hawkish Fed, some corners of the market may benefit from the policy shift. Here are a few zones that could potentially experience the positive effects of a hawkish Fed:
Financials - Financial Select Sector SPDR Fund
The financial sector, including banks and insurance companies, often benefits from higher interest rates. As rates rise, financial institutions can charge higher interest on loans and other financial products, which can lead to increased profitability and improved net interest margins.
The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to 72 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It follows the Financial Select Sector Index, charging investors 10 bps in fees per year. Financial Select Sector SPDR Fund has AUM of $32 billion and trades in an average daily volume of 44.5 million shares. It carries a Zacks ETF Rank #1 (Buy) with a Medium risk outlook.
While rising interest rates can have negative implications for consumer spending, certain segments within the consumer discretionary sector can benefit. Companies that offer luxury goods and services, such as high-end retailers, luxury automobile manufacturers, and leisure and entertainment providers, may experience increased demand as the economy strengthens and consumer confidence remains intact (read: 5 Top-Ranked ETFs That Crushed S&P 500 in First Half).
Vanguard Consumer Discretionary ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 309 stocks in its basket. In terms of industrial exposure, broad-line retail, automobile manufacturers and restaurants occupy the top spots with double-digit exposure each. Vanguard Consumer Discretionary ETF is the low-cost choice in the space, charging investors 10 bps in annual fees while volume is good at nearly 55,000 shares a day. The fund has managed $4.7 billion in its asset base so far. Vanguard Consumer Discretionary ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
Industrials - Invesco DWA Industrials Momentum ETF
Industrial sectors tend to benefit from a hawkish stance of the Fed as it reflects a stronger economy, which can lead to increased business investment, infrastructure spending, and demand for durable goods. These industries tend to perform well during periods of economic expansion.
Invesco DWA Industrials Momentum ETF provides exposure to 43 industrial companies that are showing relative strength (momentum). It is widely spread across trading companies, construction & engineering, building products and aerospace & defense. Invesco DWA Industrials Momentum ETF has accumulated $138.6 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 4,000 shares and has a Zacks ETF Rank #2 (Buy).
Floating Rate Bonds - iShares Floating Rate Bond ETF
Floating rate bonds are investment grade and do not pay a fixed rate to investors but have variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread, depending on the credit risk of issuers. Since the coupons of these bonds are adjusted periodically, these are less sensitive to an increase in rates compared to traditional bonds. Unlike fixed-coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising rate environment (read:4 ETFs Zones to Benefit as Fed Pushes Rate to Above 5%).
iShares Floating Rate Bond ETF follows the Bloomberg Barclays US Floating Rate Note < 5 Years Index and holds 335 securities in its basket. The fund has an average maturity of 1.74 years and an effective duration of 0.03 years. iShares Floating Rate Bond ETF has amassed $7.2 billion in its asset base while trading in a volume of 2 million shares per day on average. It charges 15 bps in annual fees.
With higher interest rates, cash and cash equivalents become more attractive relative to other investment options. Investors seeking stability and preservation of capital may opt to hold larger cash positions, which can be done by cash-like ETFs. These funds invest in ultra-short-term bonds and help investors to keep aside money for a couple of weeks to a few months with almost no risk.
SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 20 securities in its basket. Average maturity and adjusted duration come in at 0.10 years each. SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28.7 billion and an average daily volume of 6.5 million shares. It charges 13 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights Financial Select Sector SPDR Fund, Vanguard Consumer Discretionary ETF, Invesco DWA Industrials Momentum ETF, iShares Floating Rate Bond ETF and SPDR Bloomberg 1-3 Month T-Bill ETF
For Immediate Release
Chicago, IL – June 26, 2023 – Zacks.com announces the list of stocks and ETFs featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: Financial Select Sector SPDR Fund (XLF - Free Report) , Vanguard Consumer Discretionary ETF (VCR - Free Report) , Invesco DWA Industrials Momentum ETF (PRN - Free Report) , iShares Floating Rate Bond ETF (FLOT - Free Report) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) .
Here are highlights from Friday’s Analyst Blog:
5 ETF Zones Primes for 2023 Growth Amid Rate-Hike Prospects
The Federal Reserve, in its latest meeting, kept the rates unchanged after raising them for the 10th consecutive time to combat elevated inflation. However, the central bank maintained its hawkish stance, indicating another rate hike in the near future.
Powell stated that "inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go." Inflation has moderated since the middle of last year with the Fed's preferred measure of inflation falling substantially from a peak of around 7% last year to 4.4% as of April.
Following last week’s two-day FOMC meeting, officials indicated there could be two more quarter-percentage-point increases this year. The Fed’s benchmark borrowing rate is currently pegged in a range between 5% and 5.25% (read: Fed to Hike Rates Further: ETFs to Buy).
Given the hawkish Fed, some corners of the market may benefit from the policy shift. Here are a few zones that could potentially experience the positive effects of a hawkish Fed:
Financials - Financial Select Sector SPDR Fund
The financial sector, including banks and insurance companies, often benefits from higher interest rates. As rates rise, financial institutions can charge higher interest on loans and other financial products, which can lead to increased profitability and improved net interest margins.
The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to 72 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It follows the Financial Select Sector Index, charging investors 10 bps in fees per year. Financial Select Sector SPDR Fund has AUM of $32 billion and trades in an average daily volume of 44.5 million shares. It carries a Zacks ETF Rank #1 (Buy) with a Medium risk outlook.
Consumer Discretionary - Vanguard Consumer Discretionary ETF
While rising interest rates can have negative implications for consumer spending, certain segments within the consumer discretionary sector can benefit. Companies that offer luxury goods and services, such as high-end retailers, luxury automobile manufacturers, and leisure and entertainment providers, may experience increased demand as the economy strengthens and consumer confidence remains intact (read: 5 Top-Ranked ETFs That Crushed S&P 500 in First Half).
Vanguard Consumer Discretionary ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 309 stocks in its basket. In terms of industrial exposure, broad-line retail, automobile manufacturers and restaurants occupy the top spots with double-digit exposure each. Vanguard Consumer Discretionary ETF is the low-cost choice in the space, charging investors 10 bps in annual fees while volume is good at nearly 55,000 shares a day. The fund has managed $4.7 billion in its asset base so far. Vanguard Consumer Discretionary ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
Industrials - Invesco DWA Industrials Momentum ETF
Industrial sectors tend to benefit from a hawkish stance of the Fed as it reflects a stronger economy, which can lead to increased business investment, infrastructure spending, and demand for durable goods. These industries tend to perform well during periods of economic expansion.
Invesco DWA Industrials Momentum ETF provides exposure to 43 industrial companies that are showing relative strength (momentum). It is widely spread across trading companies, construction & engineering, building products and aerospace & defense. Invesco DWA Industrials Momentum ETF has accumulated $138.6 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 4,000 shares and has a Zacks ETF Rank #2 (Buy).
Floating Rate Bonds - iShares Floating Rate Bond ETF
Floating rate bonds are investment grade and do not pay a fixed rate to investors but have variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread, depending on the credit risk of issuers. Since the coupons of these bonds are adjusted periodically, these are less sensitive to an increase in rates compared to traditional bonds. Unlike fixed-coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising rate environment (read:4 ETFs Zones to Benefit as Fed Pushes Rate to Above 5%).
iShares Floating Rate Bond ETF follows the Bloomberg Barclays US Floating Rate Note < 5 Years Index and holds 335 securities in its basket. The fund has an average maturity of 1.74 years and an effective duration of 0.03 years. iShares Floating Rate Bond ETF has amassed $7.2 billion in its asset base while trading in a volume of 2 million shares per day on average. It charges 15 bps in annual fees.
Cash-Like ETFs - SPDR Bloomberg 1-3 Month T-Bill ETF
With higher interest rates, cash and cash equivalents become more attractive relative to other investment options. Investors seeking stability and preservation of capital may opt to hold larger cash positions, which can be done by cash-like ETFs. These funds invest in ultra-short-term bonds and help investors to keep aside money for a couple of weeks to a few months with almost no risk.
SPDR Bloomberg 1-3 Month T-Bill ETF seeks to provide exposure to zero-coupon U.S. Treasury securities that have a remaining maturity of 1-3 months. It follows the Bloomberg 1-3 Month U.S. Treasury Bill Index, holding 20 securities in its basket. Average maturity and adjusted duration come in at 0.10 years each. SPDR Bloomberg 1-3 Month T-Bill ETF has AUM of $28.7 billion and an average daily volume of 6.5 million shares. It charges 13 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.