With the Federal Reserve on a dovish path to lowering interest rates after four consecutive hikes in 2018, it’s the move capital markets are expecting, but paired with an earnings recession, it might not be what investors are actually wishing for. Nonetheless, there are opportunities to be had in the equity exchange-traded fund (ETF) space.

As investors anticipate a global economic slowdown, trade wars, and now weaker-than-expected earnings, it could be stoking the fire for more gains for bears. Ahead of the start of second-quarter earnings, data compiled by Bloomberg showed that over 80 percent of S&P 500 companies who revised their profit estimates are expecting weaker-than-expected earnings.

“Maybe a recession is not here. But it’s certainly suggesting of a significant growth turndown right now in the U.S. economy,” said Gluskin Sheff’s David Rosenberg.

Of the companies that have reported their second-quarter earnings, over 30 percent of them cite trade wars as the focal point of downward pressure.

“The stock market peaked on October of 2007 and the recession started two months later,” added Rosenberg. “This is one of these rare periods where earnings are coming down, earnings estimates are coming down and the stock market is just rocking and rolling because it’s really a momentum liquidity and central bank driven market.”

Where can bulls look to for sector strength? Ironically, it’s technology and industrials, but there’s a double-edged sword wielding–these same sectors could also be the ones that are the most susceptible to market drawdowns during a protracted trade war.

““Companies ahead of time typically trim their estimates. They lower the bar, and that’s why every single quarter you’re thinking ‘oh, like 80% of the companies are beating their estimates.’ Well, because they’ve already lowered,” said Rosenberg.

Nonetheless, traders looking to capitalize on any short-term weakness in the S&P 500, can still look to equity ETFs for opportunities.

Here are the best-performing equity ETFs thus far in 2019 for investors to consider:

SymbolETF NameYTD
SOXLDirexion Daily Semiconductor Bull 3x Shares141.86%
TECLDirexion Daily Technology Bull 3X Shares120.81%
NUGTDirexion Daily Gold Miners Bull 3X Shares104.08%
NAILDirexion Daily Homebuilders & Supplies Bull 3X Shares94.19%
DFENDirexion Daily Aerospace & Defense Bull 3X Shares91.27%
TQQQProShares UltraPro QQQ89.17%
WANTDirexion Daily Consumer Discretionary Bull 3X Shares88.17%
JNUGDirexion Daily Junior Gold Miners Index Bull 3x Shares87.38%
FASDirexion Daily Financial Bull 3X Shares82.69%
RUSLDirexion Daily Russia Bull 3x Shares81.96%

 

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