Threats of inflation, faster-than-expected interest rates, and the possibility of a trade war are playing foul in the U.S. stock market. In fact, Wall Street had a tumultuous ride last month when the major indices dropped to correction territory at one point of time.
Trump’s tariff proposal also spooked markets late last week, sparking threats of a trade war. President Trump announced his plan to impose severe tariffs of 24% on steel imports and 10% on aluminum imports “for a long period of time.” This would result in higher prices for a wide range of products thereby hurting a number of industries and overall economic growth.
While a number of these headwinds have slowed the bulls, the long-term fundamentals remain intact given solid corporate earnings and accelerating global economic growth. The euphoria surrounding the tax reform has been the biggest catalyst this year, as it will perk up the economy and save billions for corporations, leading to reflation trade and an earnings boost.
Further, increased consumer spending, rising consumer confidence, 17-year low unemployment, and a pickup in average hourly earnings are bolstering confidence in the economy and the nine-year bull market.
Given uncertainty and strong macro trends, we delved into the Zacks ETF Rank to find the best picks. The system takes into account factors such as industry outlook and expert surveys; and then applies ETF-specific factors (like expense ratios and bid/ask spreads) to spot the best funds in each and every corner of the space. Using this system, we have picked a handful of ETFs that earned a Zacks ETF Rank #1 (Strong Buy) in the latest rank update that could thus outperform.
In fact, a number of funds in their respective sectors have seen their Ranks surging to the top hierarchy from #3 (Hold) and could make great spring picks.
SPDR S&P Regional Banking ETF (KRE – Free Report)
A rising rate scenario is highly profitable for banks as these seek to borrow money at short-term rates and lend at long-term rates thereby resulting in expanding net margins and bolstering banks’ profits. KRE targets the banking corner of the financial sector and follows the S&P Regional Banks Select Industry Index.