While the markets have been weighed down by various uncertainties, stock exchange traded funds may still strengthen as many still expect the S&P 500 to maintain its momentum, with the health care sector leading the charge.
Industry analysts in aggregate predict the S&P 500 will experience a 10% advance in price over the next year, John Butters, Senior Earnings Analyst for FactSet, said in a note.
Year-to-date, the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO) have gained about 3.9%.
However, Butters warned that the outlook should be taken with a grain of salt as the final price of the index has been on average overestimated by 9.7% at the end of each month during the previous year. Industry analysts have also on average overestimated the final price of the S&P 500 by 1.6% at the end of each month during the previous five years.
On a sector-by-sector basis, analysts are most optimistic on the health care sector based on the percentage of buy ratings at the end of June. The health care sector also had the highest average percentage of buy ratings over the past 12 months.
[related_stories]However, the health care sector has been among the worst performing areas of the market this year, with the Health Care Select Sector SPDR (NYSEArca: XLV) down 2.0%, iShares U.S. Healthcare ETF (NYSEArca: IYH) down 1.2% and Vanguard Health Care ETF (NYSEArca: VHT) down 0.5% year-to-date.
Related: Healthcare ETFs Could Be Second Half Rebound Ideas
The health care sector has fallen off, notably the previously high-flying biotech sub-sector after investors shunned growth names in a year of heightened volatility.
On the other hand, analysts are most pessimistic about the energy sector based on the percentage of sell ratings at the end of June – health care had the lowest selling rating of all 10 sectors.
Year-to-date, the Energy Select Sector SPDR (NYSEArca: XLE) rose 13.5%, Vanguard Energy ETF (NYSEArca: VDE) gained 14.7% and iShares U.S. Energy ETF (NYSEArca: IYE) increased 13.6%.
Related: Supply Concerns Linger for Oil ETFs
Energy stocks have rebounded this year on the improving oil prices. However, the recovery in crude oil is beginning to stall on weak fundamentals.
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