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Fed, Trade & Global Politics to Rule June: 6 ETF Picks

Sanghamitra Saha
Updated
NantHealth, Inc. (NH) delivered earnings and revenue surprises of 23.08% and -10.83%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

The month of June can be vital to investors for many reasons from strong Fed rate hike bets to an unseasonal equity investing pattern. A consensus carried out from 1950 to 2017 shows that June ended up offering positive stock returns in 35 years and negative returns in 33 years, per moneychimp.com, with an average negative return of 0.08%.

Though the broader market has been pretty upbeat lately on solid U.S. economic growth, barring occasional dips related to geopolitical concerns, uncertainty may flare up this month thanks to 93.8% probability of a Fed hike in mid-June, as per the CME Fedwatch Tool.

Agreed, much of this looming hike is priced in at the current level, but if the Fed delivers hawkish comments regarding the guidance, Wall Street may be on a rocky ride in the near term. Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.

SPDR S&P Internet ETF XWEB

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The technology sector seems to have passed the bad times seen earlier in the year due to the Facebook debacle. A deluge of upbeat earnings results has boosted sentiments in the space. Plenty of emerging technologies and Trump’s tax cuts that led cash-rich tech titans to increase payouts to their shareholders, favored the space. The sector is well-positioned entering June (read: Best Performing Tech ETFs & Stocks of May).

PowerShares DWA Healthcare Momentum Portfolio PTH

President Trump’s announcement of the drug plans in May that were in line with the best interest of pharma companies favored the space. Trump’s plan intends to put pressure on U.S. trading partners and make them pay more for medicines.

Also, on May 30, the President signed the 'Right To Try' bill into a law. This law will help patients suffering from terminal diseases to undergo experimental treatments and use drugs that are not yet approved by the Food and Drug Administration (FDA). Needless to say, the law brought good news for biotech companies (read: Top and Flop ETF Areas of May).

PowerShares Russell 2000 Pure Growth Portfolio PXSG

With the Fed hike in cue, the greenback likely to gain strength, geopolitical tensions rife and economic growth slowing abroad (especially in developed economies), small caps are sizzling to start June. Economic well-being is seen as beneficial for domestic small-cap stocks. Since the U.S. economy has been performing better than several other developed economies, several small-cap ETFs hit a 52-week high in May. Small-cap earnings were also better performers in the latest reporting cycle (read: Here's Why Small Cap Growth ETF are Soaring).

PowerShares S&P SmallCap Consumer Staples Portfolio ETF PSCC
 
As per Equityclock, consumer staples enjoys seasonal strength in the month of June. If this is not enough, this sector is less ruffled by economic fluctuations due to its non-cyclical nature. As a result, this small-cap consumer staples ETF comes as a good bet in a historically downbeat month like June.

Amplify Online Retail ETF IBUY

In a rising rate environment, sectors like consumer discretionary and retail tend to do well. A steady job market helps the sector stay well. Notably, consumer spending logged the largest increase (0.6%) in April since a 0.7% jump last November. We expect the trend to continue ahead. And since online retailing is turning out consumers’ favored shopping medium these days, IBUY could be a good pick.

PDR Bloomberg Barclays Convertible Securities ETF CWB

Stock markets being more-or-less steady, economy having decent fundamentals and monetary policy normalizing, convertible bonds are back in the limelight. Convertible bonds offer investors the right to convert their bond holdings into a company’s shares at the holder’s discretion. The fund yields about 3.87% annually (read: 5 ETFs to Profit From Fed Activity & Guidance).

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PWRSH-DW HLT MO (PTH): ETF Research Reports
 
AMPL-ONLN RETL (IBUY): ETF Research Reports
 
SPDR-SP INTRNT (XWEB): ETF Research Reports
 
PWRSH-SP SC C S (PSCC): ETF Research Reports
 
SPDR-BBC CNV SC (CWB): ETF Research Reports
 
PWRSH-F P SM GR (PXSG): ETF Research Reports
 
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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