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5 Sector ETFs for March

Sanghamitra Saha

The wining momentum of Wall Street in 2019 has gathered more steam in March. Hope is brewing on the trade front while the central banks has been dovish. Per the latest development, President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around Mar 27, the Wall Street Journal reported on Sunday.

In late-February, President Donald Trump announced a postponement in the increase of tariffs on about $200 billion worth of Chinese goods, noting “substantial progress” in trade talks with Beijing. Trump said he had asked China to withdraw all tariffs on U.S. agricultural products instantly.

Apart from this, U.S. economic growth came in better than expected in the fourth quarter, having risen 2.6% compared with the 2.2% median estimate of economists. Apart from global growth tensions (which by now is highly priced-in), no major roadblock is in sight for markets in March.

Global markets are off to a positive start in March. In any case, the month of March has historically been blissful for the stock market. In fact, a consensus carried out from 1950 to 2018 shows that March ended up offering positive stock returns in 43 years and negative returns in 26 years, per moneychimp.com, with an average positive return of 1.05%. The return is the fourth highest, considering monthly performances.

Against this backdrop, below we highlight a few sector ETFs that could prove to be gainful in the third month of 2019.

Energy Select Sector SPDR ETF (XLE)

Per equityclock and cxoadvisory, energy enjoys seasonal strength in the month. Crude oil prices have been steady in 2019, buoyed by a fresh output cut decision by OPEC and Russia for the first six months of the year, U.S. sanctions against Venezuela on political grounds and hopes of U.S.-Sino trade truce. Also,the speed of global drilling is set to increase this year, though moderately, per analysts at World Oil forecast, as quoted on oilprice.com (read: Wall Street's Best Start Since 1987: Top ETFs of Top Sectors).

Invesco S&P 500 Equal Weight Materials ETF (RTM)

It is a high-momentum sector right now. This is also a seasonally benefited sector with the chemicals industry acting as a major tailwind. U.S.-China trade optimism, a promising chemical industry, upbeat U.S. GDP data pointing at more activity growth and a dovish Fed are doing wonders for the space. Investors should note that the fund has considerable weight in the Containers - Paper and Packaging industry, which has also been on an uptrend. The fast emergence of e-commerce has significantly aided demand in the industry (read: Why Materials & Mining ETFs Are Riding Higher).

iShares U.S. Industrials ETF (IYJ)

It is yet another sector that surges in March. Prospects of a trade deal are definitely helping the space(read: 10 ETF Areas to Gain as Trump Delays Additional Tariffs).

Amplify Online Retail ETF (IBUY)

The consumer discretionary sector also enjoys seasonal tailwind till mid-April. In any case, consumer spending is in great shape in the United States. There was a 2.8% rise in consumer spending in the fourth quarter, which actually helped GDP data beat estimates. This is especially true given that consumer spending constitutes more than 70% of U.S. GDP. Plus, earnings of the consumer discretionary sector have been pretty upbeat this season. And among retailing, online activities have been prevailing in recent times at the global level (read: Look Beyond December Retail Slump, 4 ETF Areas to Rebound).

SPDR S&P Capital Markets ETF (KCE)

A dovish Fed and the resultant steepening of the yield curve did wonders for financial stocks. Since banks borrow money at short-term rates and lend capital at long-term rates, steepening of the yield curve bodes well for bank or financial ETFs. Thanks to this trend and general seasonal help, financial ETFs look to be good bets right now (read: Rate Sensitive ETFs to Explode Higher Post Fed Minutes).

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Amplify Online Retail ETF (IBUY): ETF Research Reports
iShares U.S. Industrials ETF (IYJ): ETF Research Reports
SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
Invesco S&P 500 Equal Weight Materials ETF (RTM): ETF Research Reports
Energy Select Sector SPDR Fund (XLE): ETF Research Reports
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