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Optimism Back in Wall Street? ETFs Areas to Win the Most

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Sanghamitra Saha
·4 min read
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Wall Street looks optimistic again, thanks to plans of reopening American businesses in a phased manner in the coming days. President Trump revealed new guidelines on Apr 16 to help states ease their social distancing controls and take a call on  the areas of concern. However, the plans show that the return to complete normalcy will take much longer than initially expected.

In addition, developments in the treatment and vaccine phase have been encouraging. Gilead Sciences’ GILD antiviral medicine remdesivir has been receiving positive response in clinical trials in some COVID-19 patients. If safe and effective, remdesivir has the chance of becoming the first approved treatment against the disease (read: Biotech Stocks, ETFs To Gain On COVID-19 Vaccine & Drug Progress).

Plus, Abbott ABT has launched its third COVID-19 test. This time it is a lab-based serology blood test for the detection of the antibody that tells if a person has suffered from the COVID-19. Then there are health-care giants like Johnson & Johnson JNJ which are trying to come up with a vaccine. Notably, the first potential vaccine from the manufacturer Moderna (MRNA) was injected into people on Mar 16. Pfizer Inc. PFE too is engaged in the development and distribution of BioNTech SE’s BNTX COVID-19 vaccine candidate.

Though complete normalcy is not possible right now as reopening varies from state to state and also comes with certain conditions, investors look hopeful about market recovery. Stock futures surged on Apr 16. There are high chances some laggards will emerge as leaders in the near term.

Industrials

The sector has suffered massively.Per the Federal Reserve, industrial production fell 5.4% in March — the worst drop since January 1946, as several factories had to suspend operations owing to the pandemic. Also, ISM Manufacturing Purchasing Managers’ Index (PMI) came in at 49.1%, indicating a contraction.

With about 22 million Americans now unemployed, creation of blue-collar jobs would be of high priority. So, the industrial sector should be opened with appropriate social distancing norms in the coming days. Investors can expect some gains in Industrial Select Sector SPDR Fund XLI.

Retail

Retail — predominantly dependent on consumer discretionary activity — had a painful stretch in the peak of the pandemic due to store closures. Gradual reopening of businesses and job creations should favor this hard-hit sector and the fund VanEck Vectors Retail ETF (RTH). However, the recovery may be rough with consumers being cash-strapped (read: Coronavirus Ruins March Retail Sales: Top & Flop ETF Areas).

Mid-Caps

The Fed’s massive loan programs toward small and mid-sized businesses as well as the reopening of the economy should bode well for smaller-sized stocks. Vanguard Mid-Cap Index Fund ETF Shares VO can be watched closely for some near-term gains.

Energy

The sector is in excruciating pain with oil prices slipping to almost a two-decade low. Oil is hovering at around $20, having started the year at $65. Per the International Energy Agency (IEA), oil demand might hit the lowest in 25 years, as quoted on the Guardian. However, if global lockdowns are  lifted gradually , oil might stage some recovery. VanEck Vectors Oil Refiners ETF CRAK should see some respite in that case.

Dow Jones

This key U.S. index has lagged its two bigger counterparts amid the pandemic-led selloff. This leader may now record a better rebound as its key holding Boeing BA plans to resume the production of 737 Max -- which was shelved following fatal accidents. SPDR Dow Jones Industrial Average ETF DIA could thus be kept an eye on for some gains.

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Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
 
VanEck Vectors Retail ETF (RTH): ETF Research Reports
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
VanEck Vectors Oil Refiners ETF (CRAK): ETF Research Reports
 
Vanguard Mid-Cap ETF (VO): ETF Research Reports
 
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