As we mull over ideas after the market correction, investors should look at targeted markets and exchange traded fund segments to capitalize on potential opportunities.
For instance, JPMorgan Private Bank’s Steven Rees singled out the consumer discretionary and health care sectors after the two areas fell off 9% this year, despite delivering positive earnings growth, reports Tom DiChristopher for CNBC.
“I think what we see is a lot of decoupling between parts of the market where the fundamentals have actually been quite strong, looking at the more domestic sectors like consumer discretionary and health care,” Rees told CNBC.
Investors can also gain broad exposure to these sectors through ETF options. For instance, the iShares US Consumer Services ETF (NYSEArca: IYC), Vanguard Consumer Discretionary ETF (NYSEArca: VCR) and Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) provide access to the consumer discretionary sector.
For health care exposure, investors can take a look at the Health Care Select Sector SPDR (NYSEArca: XLV), iShares U.S. Healthcare ETF (NYSEArca: IYH), Vanguard Health Care ETF (NYSEArca: VHT) and Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC).
Moreover, the investment bank has targeted large-cap growth stocks in the tech space as one of its preferred investments.
ETF investors can also tap into this sector through options like the Technology Select Sector SPDR (NYSEArca: XLK), iShares U.S. Technology ETF (NYSEArca: IYW) and Vanguard Information Technology ETF (NYSEArca: VGT).
JPMorgan also argues that financials, the worst performing S&P 500 sector this year, have been oversold and look attractive on a long-term basis. However, the bank warned that long-term recovery depends on Federal Reserve interest rate hikes.
Meanwhile, in a prolonged low-interest rate environment, Rees believes dividend-paying stocks are also a good buy.
“Growth companies with 3 to 4 percent yields in the domestic sectors look very attractive,” Rees added. “A lot of people were negative on dividend yields this year because they thought rates were going to rise. That hasn’t happened.”
Investors also have a number of high-quality dividend-paying stock ETFs to choose from. The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years and has a 2.39% 12-month yield. The Schwab US Dividend Equity ETF (NYSEArca: SCHD) includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years, and it has a 3.04% 12-month yield. The SPDR S&P Dividend ETF (NYSEArca: SDY) holds firms that have a minimum dividend increase streak of 20 years for inclusion and shows a 2.61% 12-month yield. The ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) only includes companies that have increased their dividends for at least 25 consecutive years and offers a 2.06% 12-month yield.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.