With news that inflation once again cooled arriving on Tuesday, investors may be feeling more confident about a Fed rate pause. Markets have been excited by the prospect of a pause in ongoing rates for months. Further, the news boosts the case for growth-minded ETFs that may invest in disruptive areas in tech and medicine. Those areas have proved surprisingly durable so far this year amid bearish rate and recession fears, and could be ready for a further boost.
See more: “Consumer Spending Trends: Inside E-Commerce, Luxury Goods, and More”
Fed Rate Pause Options
As such, investors and ETF watchers may want to consider a few growthier ETFs. Such strategies could be well positioned to respond to market ebullience should the Fed indeed pause on hikes this week. That list starts with the surprisingly durable performance of the ALPS Medical Breakthroughs ETF (SBIO).
SBIO tracks the S-Network Medical Breakthroughs Index, a market cap-weighted list of U.S. listed-biotech firms. SBIO screens for sustainability at these firms, looking for cash on hand to last two years. With biotech development a high-risk, high-reward world, SBIO’s 50 basis point fee may offer an intriguing entry. SBIO has returned 8.9% YTD and 20.9% over three months, up $1.6 million over one month in AUM.
The ALPS Barron’s 400 ETF (BFOR) offers a different take with a total U.S. market view. BFOR uses fundamental factors to initially select its holdings and then equally weights them. The ETF seeks the 400 highest-scoring firms based on a growth at a reasonable price (GARP) methodology, capping sector exposure at 20% of the index.
BFOR tracks the Barron’s 400 index at a 65 basis point fee, returning 7% over the last month, 3% more than its FactSet segment average. It just hit its 10-year anniversary as an ETF, as well.
Finally, very ebullient investors can revisit the disruptive tech ARK Innovation Fund (ARKK). Charging more than either SBIO or BFOR, ARKK actively invests in firms that take a disruptive approach to their subsectors. ARKK has returned 11.4% over the last month and is another option for a Fed rate pause.
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vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for SBIO, for which it receives an index licensing fee. However, SBIO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.
