MPower: 1 ETF To Watch, 1 To Avoid
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Over the past month, stocks have largely been on an elevator ride down. Sectors across the market are seeing red, but there has also been a bright spot or two. The problem with today’s market is that it’s so volatile which makes it hard to determine where the bottom of a stock or sector is.
Because of this uncertainty, the path forward for investors isn’t as clear as we would like. Given the giant swings the market makes in the wake of any statement given by Jerome Powell, we could be in for another ride as the Fed Chairman readies to make another statement tomorrow. In light of this, it might be time to look into some sectors investors should be paying attention to.
First, a sector many may want to keep their eyes on, but not to go long on right now. The technology sector, and a tech ETF like (XLK), which on average offers investors the highest potential for gains, is also very susceptible to sell offs in the market. Their risk profiles means that the appetite for these stocks dries up very fast on the slightest hint of a bearish trend.
This is the first sector to see hordes of investors exit as the economic outlook becomes increasingly grim. Powell is set to speak at the Monetary Policy Conference, where he will undoubtedly make remarks on the economy. If the Fed’s theme holds true, this speech may have similar effects as they have in the past. In this case, I would be very wary of making any additional investments in this sector.
In contrast, when investors leave one sector, they make their way into another. Other than the energy sector, which had a rough day today, consumer staples stocks or an ETF like (XLP) have seen some positive rays of light. Walmart (WMT) has seen its stock rise over the past month, even in the face of a down market. The change in consumer spending for household items like food and other everyday supplies have become the focus for shoppers. Not just that, but also where they can get their favorite, necessary products at the best prices.
Investors, like consumers, also experience a change in behavior. They too are looking for the best deals, some of those deals come in the form of buying stocks that are more defensive, stocks like Coca-Cola (KO) for example. This kind of stock reassures investors, through historical performance, that their money may be safe(r) here. This coupled with the fact that these stock will pay investors, which adds padding to the crash landing we may be in for.
But there are other names other than KO that investors can protect themselves with. To find out what our other options could be, we turn again to Magnifi.
As you can see when you filter for stock only, many of the names that are included in this sector are some of the most popular brands for everyday items. Generally speaking, people don’t stop drinking their favorite soft drinks due to an economic slowdown, and they certainly need to continue to buy a wide variety of those household supplies produced by Procter & Gamble (PG).
In fact, there’s a good chance you bought or used a product produced by one of these companies today. The ability of a company to weather these economic storms depends largely on if their customers will continue to consume their products regardless of what the weather outside is like.
Be adaptable to the ever changing market conditions and explore to see which of these names belongs in your portfolio today!
Today’s feature: Consumer Staples
