Cyclical stocks, like materials, industrials, energy and technology companies, are more economically sensitive and do well when the economy is improving. With the Federal Reserve set to hike rates, the rising rate environment would signal a better economic outlook. As is the case with many growth ETFs, SPYG has a hefty cyclical tilt.
Traditional growth funds, including ETFs, are usually heavily allocated to two sectors: Technology and consumer discretionary. SPYG follows suit as those sectors combine for about 52.7% of the ETF’s weight. Eight of the ETF’s top 10 holdings hail from those two sectors. That group includes Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN).
Value stocks typically trade at cheaper prices relative to fundamental measures of value, such as earnings and the book value of assets. In contrast, growth stocks tend to run at higher valuations since investors expect the rapid growth in those company measures.
SPYG, which holds nearly 330 stocks, is a cost-effective ETF. The ETF’s annual fee is just 0.15%, or $15 on a $10,000 investment.
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Tom Lydon’s clients own shares of Apple.