Wall Street has been wavering in recent sessions due to renewed virus fears, higher inflation and rising rate worries. The S&P 500 (down 0.1%), the Dow Jones (down 0.2%), the Nasdaq Composite (down 0.9%) and the Russell 2000 (down 1.4%) slid in the past five days. Still, the key equity gauges have been hovering around record highs and several of the key economic data have been coming in positive. This calls for a buy-the-dip strategy.
Ark Investment Management founder Cathie Wood, who has created a great fan following, for the immense success of the products like Ark Innovation ETF ARKK and ARK Next Generation Internet ETF ARKW, also suggested to not sell the dip, per a Bloomberg article, as quoted on Yahoo Finance.
Wood’s flagship Ark Innovation ETF has dropped roughly 15% in the year versus the S&P 500’s 25% gain, prompting some traders to sell. But Wood believes that now is actually the time to buy her strategy. It offers a deal now. Apart from ARKK, we also highlight some other ETFs that offer good buying opportunities now. These include U.S. Global Jets ETF JETS, First Trust Financials AlphaDEX ETF FXO, SPDR S&P Biotech ETF XBI, Vanguard Extended Market ETF VXF and Global X SuperDividend ETF SDIV.
ETFs in Focus
U.S. Global Jets ETF (JETS) – Down 2.2% Past Month, P/E (36 Months): 4.32X
The travel and tourism industry, which was hit by the Delta variant of COVID-19 for months, staged a nice comeback recently. This is especially true as airline stocks along with online booking sites, ride-hailing, entertainment and leisure companies spiked on a few earnings announcements and more success on vaccine, booster shots and antiviral therapies front.
The latest slump in oil prices should also favor U.S. Global Jets ETF, as several airlines stopped hedging fuel prices last year amid the heightening virus scare which hit the demand for oil hard (read: Rally in Travel and Tourism ETFs Set to Continue).
First Trust Financials AlphaDEX ETF FXO – Down 0.6% Past Month, P/E (36 Months): 8.01X
Rising inflationary fears and the resultant rise in long-term bond yields will lead to a steepening yield curve. Since banks borrow money at short-term rates and lend capital at long-term rates, the steepening of the yield curve is always a plus for bank ETFs. Bank stocks offer great value and the earnings of the financial sector have come in upbeat this reporting season (read: Financial ETFs at a 52-Week High: Further Rally Looks Likely).
Global X SuperDividend ETF SDIV – Down 5.19% Past Month, P/E (36 Months): 9.03X
The demand for high dividend should be higher with rising rate prospects. The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world. Global X SuperDividend ETF yields 8.00% annually and charges 59 bps in fees.
SPDR S&P Biotech ETF XBI – Down 3.87% Past Month, P/E (36 Months): 12.07X
The healthcare sector should remain upbeat given the flow of news related to new vaccine update, booster shots and more antiviral therapies. The FDA has broadened the emergency use authorization approval of Moderna’s (MRNA) COVID-19 vaccine booster shot at the 50-µg dose level to all adults aged 18 and above.
The Pfizer Inc. (PFE) and BioNTech SE (BNTX) COVID-19 vaccine have hit the market. Earlier this month, the UK medicines regulator approved molnupiravir, the COVID-19 antiviral developed by Merck and Ridgeback Therapeutics. Now, Pfizer has released results from the trials of its antiviral drug – paxlovid. These antivirals lower the risk of hospitalisation or death materially.
Vanguard Extended Market ETF VXF – Down 1.01% Past Month, P/E (36 Months): 17.7X
Stovall, chief investment strategist at CFRA, added that the market could move sideways to lower for some time now but should close 2021 on a higher note, as quoted on CNBC. The Philadelphia Fed manufacturing index displayed solid, better-than-expected activity in the mid-Atlantic region. Solid retail earnings and upbeat monthly retail sales data released lately called for upbeat consumer sentiments (read: Will ETFs Win During Thanksgiving Week Amid Virus Fears?).
The underlying S&P Completion Index contains all of the U.S. common stocks regularly traded on the New York Stock Exchange and the Nasdaq over-the-counter market, except for those stocks that are included on the S&P 500 Index. Vanguard Extended Market ETF charges 6 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.