The Zacks Analyst Blog Highlights SPDR S&P Biotech ETF, SPDR S&P Semiconductor ETF, First Trust Indxx Aerospace & Defense ETF, First Trust NASDAQ-100-Technology Sector Index Fund and iShares U.S. Digital Infrastructure and Real Estate ETF
Chicago, IL – November 19, 2024 – Zacks.com announces the list of 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: SPDR S&P Biotech ETF XBI, SPDR S&P Semiconductor ETF XSD, First Trust Indxx Aerospace & Defense ETF MISL, First Trust NASDAQ-100-Technology Sector Index Fund QTEC and iShares U.S. Digital Infrastructure and Real Estate ETF IDGT.
Here are highlights from Monday’s Analyst Blog:
5 Top-Ranked ETFs to Buy on the Dip
After the best week of 2024 on excitement over President-elect Trump’s policies, Wall Street lost momentum last week on sticky inflation and the Fed’s hawkish comments. The S&P 500 dropped more than 2% while the Dow Jones Industrial Average shed 1.3%. The tech-heavy Nasdaq Composite Index lost more than 3%.
Market expectations for interest rate cuts have come down materially and Federal Reserve Chair Jerome Powell signaled that the central bank is not in a hurry to slash rates, citing ongoing economic growth and a solid job market. Per the CME FedWatch Tool, traders increased bets that the Fed will not change rates at its December meeting, pricing in a roughly 42% chance versus roughly 14% a month ago.
However, investors could take advantage of the beaten-down prices, given that the second Trump administration will boost stocks. We have highlighted five ETFs from different corners that have declined over the past week and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These products are poised to outperform when the market resumes its uptrend.
Below are some reasons to buy on the dip:
Trump Trade Boost
The market is betting that Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and reducing regulations may boost the economy but also accelerate inflation, limiting the Federal Reserve's ability to cut rates. The anticipation of greater tariff barriers and a step to move manufacturing back home is expected to drive stocks higher (read: Top ETF Winners from the Trump Trade).
Lower Rates
Though the rate cuts in the December meeting are uncertain, the Fed has slashed interest rates two times this year. It cut key interest rates by 25 bps this month, followed by the 50-bps cut in September. This brings down the benchmark rate to 4.5%-4.75%. Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand their operations more easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
Strong Holiday Season
The National Retail Federation (NRF) expects a strong holiday season this year, with more consumer spending in a shorter shopping season. On average, consumer spending is expected to reach a record $902 per person across gifts, food, decorations and other seasonal items. This represents an increase of about $25 per person more than last year’s figure and $16 higher than the previous record set in 2019.
According to the Conference Board Holiday Spending Survey, the average U.S. consumer intends to spend $1,063 on holiday-related purchases in 2024, up 7.9% from $985 in 2023, $1,066 in 2022 and $1,022 in 2021. Strong spending will buoy the stock market for the rest of the year.
Bulls are Here
According to a Bank of America survey, investor exposure to U.S. stocks jumped to the highest level since 2013 after the presidential election on optimism about stronger economic growth. The survey showed that fund managers expect U.S. stocks to be the best-performing asset class next year, followed by global equities (read: US Stocks' Exposure Jumps to a Decade-High Level: ETFs to Tap).
The stock market could witness a stronger rally toward the end of the year following Donald Trump’s victory than it did when he won his first term eight years ago, according to JPMorgan Chase. “Strength in the so-called Magnificent Seven technology stocks will continue to propel equity markets, while financials will be the best performing S&P 500 sector through the end of the year.”
ETFs to Buy
SPDR S&P Biotech ETF – Down 11.8%
SPDR S&P Biotech ETF offers exposure to the biotech corner of the healthcare sector by tracking the S&P Biotechnology Select Industry Index. It holds 145 stocks in its basket with modest exposure across various securities. SPDR S&P Biotech ETF has amassed $7.8 billion in its asset base and charges 35 bps in annual fees. It trades in an average daily volume of 7 million shares and has a Zacks ETF Rank #2.
SPDR S&P Semiconductor ETF – Down 10.5%
SPDR S&P Semiconductor ETF offers exposure to the semiconductor segment of the broader technology sector and tracks the S&P Semiconductor Select Industry Index. It holds 40 stocks in its portfolio. SPDR S&P Semiconductor ETF has AUM of $1.3 billion and an average daily volume of about 45,000 shares. It charges 35 bps in fees per year and has a Zacks ETF Rank #1 (read: What Lies Ahead for Semiconductor ETFs: Boom or Gloom?).
First Trust Indxx Aerospace & Defense ETF – Down 5.9%
First Trust Indxx Aerospace & Defense ETF offers exposure to U.S. companies engaged in business activities associated with certain aerospace and defense sub-themes, as identified by the index provider. It tracks the Indxx US Aerospace & Defense Index and holds 34 stocks in its basket. MISL has AUM of $118.2 million and charges 60 bps in annual fees. The fund trades in an average daily volume of 24,000 shares and has a Zacks ETF Rank #2.
First Trust NASDAQ-100-Technology Sector Index Fund – Down 5%
First Trust NASDAQ-100-Technology Sector Index Fund tracks the NASDAQ-100 Technology Sector Index, holding 43 stocks in its basket with almost equal allocation. From an industry look, software and semiconductors dominate the list with 41.2% and 32.8% share, respectively, while consumer digital services and production technology equipment make up for the next two spots. First Trust NASDAQ-100-Technology Sector Index Fund is a large-cap-centric fund with AUM of $4 billion and an average daily volume of around 111,000 shares. It charges 57 bps in annual fees and has a Zacks ETF Rank #1.
iShares U.S. Digital Infrastructure and Real Estate ETF – Down 4.7%
iShares U.S. Digital Infrastructure and Real Estate ETF offers exposure to U.S.-listed companies involved in the storage, processing, transmission and/or access of digital data and services. It follows the S&P Data Center, Tower REIT and Communications Equipment Index and holds 28 stocks in its basket. iShares U.S. Digital Infrastructure and Real Estate ETF has accumulated $85.6 million in its asset base and charges 41 bps in annual fees. It has a Zacks ETF Rank #1.
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