Meanwhile, homebuilders are still on the road to full recovery. While housing starts jumped to about 1.1 million homes last year, fundamentals like population growth and so-called scrappage suggest a normal rate of 1.5 million new homes, according to the First Trust economists.

Investors can track the homebuilder space with the SPDR S&P Homebuilders ETF (NYSEArca: XHB) and the iShares U.S. Home Construction ETF (NYSEArca: ITB). The two homebuilder ETFs also include a significant tilt toward consumer discretionary or retail names. For  instance, XHB tracks 14.5% home furnishing retail, 10.7% home furnishings and 6.0% household appliances. ITB includes 8.8% home improvement retail and 4.4% home furnishings.

After the recent selling pressure, investors who have extra cash on hand may find that that it is now an opportune time to invest on the cheap.

“US equities were relatively cheap before 2015 started and even cheaper today,” First Trust economists said. “We recommend keeping a stiff upper lip, and waiting for pessimistic investors to realize their mistake. Even with more rate hikes coming, the US stock market is still significantly undervalued.”

Max Chen contributed to this article.