Zacks Investment Ideas feature highlights: Vanguard Financial ETF, WisdomTree U.S. Dividend Growth ETF, Vanguard Information Technology ETF and Industrial Select Sector SPDR Fund
CHICAGO, June 18, 2013 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Vanguard Financial ETF (AMEX: VFH-Free Report), WisdomTree U.S. Dividend Growth ETF (Nasdaq: DGRW-Free Report), Vanguard Information Technology ETF (AMEX: VGT-Free Report) and Industrial Select Sector SPDR Fund (AMEX: XLI-Free Report).
Winning ETF Strategies for the Second Half
The stock market has been pretty volatile lately as investors awoke to the realization that the Fed will ultimately 'taper' its QE program. Bond yields have surged and many international markets have tumbled as markets tried to guess the Fed's next move.
The Fed's statement after its Wednesday meeting and chairman Bernanke's press conference will hopefully provide some clarity regarding the future direction of the monetary policy. While it is quite unlikely that the Fed will actually dial down its bond purchases until the economic prospects pick up significantly, financial markets price in what they expect the Fed do in the future and not what the Fed is doing now.
Inventors should remember that market moves are often sudden as the sentiments change and though the long-term bullish trend for stocks appears to be intact for now, this may the right time for investors to position their ETF portfolios for an eventual tapering of the Fed's unprecedented support and pickup in economic growth.
Buy Growth Sector ETFs as the Economy Improves
Defensive sectors outperformed the broader market earlier this year but since last month,
cyclical sectors have started surging ahead. As the economy shows further signs of improvement, more and more investors will move out of defensive sectors like utilities and consumer staples and into cyclical sectors like technology and industrials. (Read: 3 Impressive Biotech ETFs Crushing the Market)
Dividend ETFs that were concentrated in defensive sectors—typically high dividend payers-- have also come under pressure. These ETFs had become somewhat expensive as investors continue to pour money into them the search of yield. While we still like dividends paying stocks and ETFs, the next winners in dividend ETFs will most likely be those focused on relatively attractively valued, high-growth cyclical sectors.
Technology and Finance companies have been dividend growth leaders in the last few years. Technology companies currently have a lot of cash on their balance sheets and will continue to generate large amounts of cash going forward too. Finance companies have also been on the mend and many of them got Fed approval to raise dividend after passing stress tests. (Read: Buy these ETFs for Excellent Dividend Growth)
Investor should consider Vanguard Financial ETF (AMEX: VFH-Free Report), WisdomTree U.S. Dividend Growth ETF (Nasdaq: DGRW-Free Report), Vanguard Information Technology ETF (AMEX: VGT-Free Report) and Industrial Select Sector SPDR Fund (AMEX: XLI-Free Report).
Prepare for the Rise in Interest Rates
Due to concerns about the Fed finally scaling down its asset purchases, interest rates have been going up in the past three weeks. 10 year treasury yield touched 2.29% on June 11, the highest since April 2012. (Read: Forget Dividend ETFs; Focus on Buybacks instead)
Even though the tapering announcement from the Fed may not come in the next couple of meetings, the rates will likely continue to creep up. Thus, it may be a good idea to get rid of all long duration products in your portfolio, as they will be hurt the most in a rising interest rate environment.
Remember very short-term rates will stay low as long as the Fed maintains the fed funds at near zero levels--most likely till the second half of 2015, but the long-term interest rates will begin moving up as soon as market anticipates any likely change in the Fed's monetary policy.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Get the full Report on VFH - FREE
Get the full Report on DGRW - FREE
Get the full Report on VGT – FREE
Get the full Report on XLI - FREE
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.