ETF Areas to Consider for Rotating Out of Tech in 2022

This story originally appeared on Zacks

Wall Street had a disappointing start to 2022 as 10-year Treasury yields continued to rise. The S&P 500 fell continuously for four days for the first time since September in the last week ending January 7. Moreover, the Nasdaq Composite Index also saw a four-day losing streak in the first trading week of the year.

– Zacks

This slowdown in the market could mainly be caused by higher 10-year Treasury yields, which rose to over 1.8% on January 7 after hitting 1.51% on December 31. Growth sectors like the technology sector have been feeling the pain of rising bond yields as the same reduces the relative value of future earnings, making popular stocks look overpriced. Tech companies are also facing hurdles in financing their growth and repurchasing shares due to higher prices (according to a CNBC article).

In this regard, Chris Hussey of Goldman Sachs commented, “As we launch in 2022 this week, trading interest has fallen into a terminal value spin and pro-cyclical stocks and exited growth as investors digested a sharply higher rate environment,” stated in the CNBC article. .

Thus, for investors looking to exit growth focused investments, we have highlighted some interesting areas of the ETF:

The value of ETFs

It is worth noting here that value investing appears to be more profitable, given the recovery of the US economy, the expectation of higher inflation and the chances of a Federal Reserve rate hike. Moreover, stock value seeks to take advantage of market inefficiencies. They can achieve higher returns with lower volatility compared to their growth and blend counterparts. In addition, value stocks have less exposure to traded markets, and dividends provide a shield against market turmoil.

Against this background, here are some valuable ETFs that investors can bet on. here they are iShares S&P 500 Value ETFs I’ve, Vanguard Mega Cap Value ETF MGV, Schwab American Big Value Fund (SCHV) and Invesco S&P 500 Enhanced Value Fund (SPVU) (Read: 5 of the Best ETFs to Buy at Bargain Prices).

Bank ETFs

There are several factors working in favor of space. The Fed has already begun to scale back its bond purchases, which it expects to complete by March of this year. The Fed is expected to start raising the benchmark interest rate in March. Chances are the Federal Reserve will take a bolder approach to raising interest rates. Shifting toward tighter monetary policy will push revenues higher, thus helping the financial sector. This is because higher prices will help increase profits for banks, insurance companies, discount brokerages, and asset managers. The slope of the yield curve (the difference between short and long-term interest rates) is likely to support banks’ net interest margins. As a result, net interest income, which constitutes a significant portion of banks’ revenue, is likely to be supported by a steeper yield curve and a modest rise in loan demand.

Here we highlight some ETFs that can benefit from the bright prospects of the banking sector, Invesco KBW Bank ETF KBWB, ETF S&P Regional Banking SPDR KRE, iShares US Regional Banks ETF (IAT) and SPDR S&P Bank ETF (KBE) (Read: Inflation to stay hot in early 2022: ETF strategies to win).

Energy ETFs

Investors are closely following the energy sector, which is showing its strength as global demand and economic growth levels are on track to recover from the pandemic lows. The rollout of the coronavirus vaccine is gradually controlling the spread of the outbreak worldwide. Optimism surrounding the reopening of global economies and rising demand paint a rosy picture of cyclical sectors.

According to a CNBC article, energy stocks are having their best year in more than three decades. The sector gained more than 47% in 2021. Oil prices have been on the rise since the start of 2022. The uptrend in crude oil prices was triggered by a variety of factors such as easing Omicron’s shifting fears, protests in Kazakhstan, and outages in Libya causing Supply shortages and lower OPEC+ production.

Here are some options that investors should consider. These include Invesco Dynamic Energy Exploration & Production ETF PXE, Vanguard Energy ETF VDE, Fidelity MSCI Energy Index ETF (Girls) , SPDR Energy Sector Selection Fund (XLE) and iShares US Energy ETF (IYE) (Read: Energy highlights best sector for 2021: 5 ETFs that reach at least 70%).

consumer dictionary

Consumers showed unexpected resilience in dealing with concerns regarding rising Omicron cases and rising inflation levels in December. They seem optimistic about improving business conditions and the US economy recovering from the slowdown caused by the pandemic.

The Conference Board’s measure of consumer confidence settled at 115.8 in December, compared to an upwardly revised reading of 111.9 in November. The December reading beat the scale’s consensus estimate, coming in at 111, according to a Bloomberg survey.

The encouraging consumer confidence reading may support the discretionary consumer goods sector, which is attracting a large portion of consumer spending amid rising inflation levels. Some of the ETFs that you may earn are SPDR Consumer Discretionary Sector Selection Fund XLY, ETF Consumer Discretionary Vanguard VCR, AlphaDEX Consumer 1 Fund (FXD) and Fidelity MSCI Consumer Discretionary Index ETF (FDIS) (Read: ETFs to Drive Nearly $1 Million in Tesla Car Deliveries.)

Want to have key ETF information delivered straight to your inbox?

Zacks Fund’s free newsletter will bring you top news and analysis, as well as top performing ETFs, every week.

Get it for free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 of the best stocks for the next 30 days. Click for this free report

Consumer Discretionary Sector Choice SPDR ETF (XLY): ETF Research Reports

SPDR S&P Regional Banking ETF (KRE): ETF Research Reports

Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports

Vanguard Energy ETF (VDE): ETF Research Reports

Invesco KBW Bank ETF (KBWB): ETF Research Reports

iShares S&P 500 Value ETF (IVE): ETF Research Reports

Invesco Exploration and Production Dynamic Energy ETF (PXE): ETF Research Reports

Vanguard Mega Cap Value ETF (MGV): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

.

Leave a Comment