Cyclical Shifts Could Benefit a Surprising ETF | ETF Trends

Data indicate professional investors are revisiting cyclical stocks and that trend could have positive implications for a surprising ETF: The Principal Millennials Index ETF (Nasdaq: GENY).

GENY tracks the Nasdaq Global Millennial Opportunity Index. This index seeks to capture the global spending and lifestyle activities of the largest generation ever, offering exposure to brand name companies specializing in social media, digital media, technology, healthy lifestyles, travel, and leisure. The companies will evolve over time as the spending patterns of millennials change as they age.

The reason GENY merits a place in the conversation about a cyclical rotation is simple. Consumer discretionary is one of the four cyclical sectors and GENY allocates 37.26% of its weight to that group, according to issuer data. That’s more than triple the S&P 500’s weight to that sector.

Going With GENY ETF

Bank of America equity strategists note long-only hedge funds “have made big increases in their real estate and consumer discretionary holdings while selling defensive utility companies. They’re not all-in on cyclical sectors, though, as they’ve also reduced their exposure to banks and energy and industrial companies,” reports Business Insider.

Integral parts of the Gen Z-related investment thesis are shopping and entertainment consumption trends. Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment.

Another advantage of GENY is that it largely avoids groups and sectors that are chock full of value traps.

Those include “healthcare technology, diversified telecom, communications equipment, diversified consumer services, industrial conglomerates, equity REITs, real estate management, and broad-based utilities,” according to Business Insider.

Improving economic data also bolsters the case for Principal’s GENY.

“U.S. economic data released in August generally exceeded consensus forecasts in the realms of both manufacturing and services, with surprising strength in job gains,” said BlackRock in a recent note. “Housing data was also strong last month, with both new and existing home sales coming in above consensus expectations.”

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