The U.S. government shutdown has wreaked havoc on stocks, but hints of a potential resolution could help propel some areas in the market and exchange traded funds.
On Wednesday, Rep. Paul Ryan R.-Wisc. proposed a short-term solution to the debt limit, which has drawn broad support from conservatives.
Some of the most recent best performing stocks have taken a beating as investors sold off and tried to lock-in profits after the impressive run. Areas like Internet stocks and biotechnology have been hardest hit.
“The debt ceiling is causing the fear over locking in returns,’” Ian Winer, director of equity trading at Wedbush Securities Inc., said in a Bloomberg article. “Guys are looking at their portfolios and saying, ’These are up huge, maybe I sell some to lock in some gains and revisit post debt-ceiling resolution.’”
Looking at asset categories, riskier small-cap stocks have also been pressured, but small-caps could turn around once the risk-off environment dissipates.
If the U.S. government agrees to terms on raising the debt ceiling, the foreign exchange market could offer investors an interesting opportunity, particularly in emerging markets.
Additionally, financial stocks could see the pressure lifted as many banks have significant holdings in U.S. debt.
Next page includes ETF options to track the five areas: