CHICAGO, Jan. 8, 2014 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: iShares Industrials ETF (AMEX: IYJ-Free Report), Vanguard Information Technology ETF (AMEX: VGT-Free Report) and SPDR S&P Insurance ETF (AMEX: KIE-Free Report).
Best ETF Strategies for 2014
US stocks had a spectacular run in 2013—delivering their best annual performance in more than a decade. At current levels, stocks are not cheap but they are not too expensive either. An improving economy, receding fiscal drag and an accommodative monetary policy should support further gains in stocks though gains will most likely be nowhere close to last year's. (Read: 3 Hot Sector ETFs for 2014)
The Fed starts 'tapering' its asset purchase program this month and may announce further reductions at a "measured pace" this year if the economy and the labor market continue to improve.
With interest rates on the rise, the three decade long bull market for bonds has come to an end. The US bond market as measured by the Barclays US Aggregate Bond Total Return Index had a 2% decline in 2013. The losses may accelerate this year, particularly for long term treasury and mortgage bonds.
As we head into 2014, it may be a good time to look at your portfolio and realign it according to the changing investment landscape. (Read: 3 Best Dividend ETFs of 2013)
Top Sectors for 2014
Sectors like Technology, Industrials and Financials outperform in the improving economic and rising rate environment. Technology sector has remained mostly out of favor with investors last year due to several industry-specific issues and less-than supportive global macroeconomic environment. At current valuations, the sector looks attractive. Continued pick-up in the manufacturing activity bodes well for Industrials.
Among Financials, Banks—Regional Banks in particular—benefit from the steepening yield curve while Insurance companies benefit from rising rates as well as brightening economic picture. Consumer discretionary stocks had an excellent run in 2013 but they may continue their uptrend if the job market continues to heal. (Read: Follow Warren Buffett in 2014 with these sector ETFs)
Some of the top ranked ETFs from these sectors like iShares Industrials ETF (AMEX: IYJ-Free Report), Vanguard Information Technology ETF (AMEX: VGT-Free Report) and SPDR S&P Insurance ETF (AMEX: KIE-Free Report) are worth considering.
On the other hand, bond-like sectors including Utilities, Telecom and REITs will suffer setbacks if interest rates continue to rise.
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SOURCE Zacks Investment Research, Inc.