As the Federal Reserve cogitates on another interest rate hike this month and many adapt their portfolios to the shifting environment ahead, investors should look to targeted sector exchange traded fund plays that do well in a rate-hike cycle.
While income-related equities have traditionally demonstrated the most vulnerability in the year with rates on the rise, the energy, technology and health care sectors have historically outperformed on average relative to the markets, according to Fidelity Investments.
“During the past half-century, energy, technology, and health care have been the best-performing sectors, on average, relative to the market when rates are on the rise, while consumer discretionary and utilities have done the worst,” according to a Fidelity research note.
ETF investors can also access these sectors through targeted plays. For instance, the Fidelity MSCI Energy Index ETF (NYSEArca: FENY), he Energy Select Sector SPDR (NYSEArca: XLE) and Vanguard Energy ETF (NYSEArca: VDE) are popular ways to access the segment.
For technology sector exposure, look to the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC), Technology Select Sector SPDR (NYSEArca: XLK) and Vanguard Information Technology ETF (NYSEArca: VGT).