After a horrendous sell-off in the first two months of 2016, the third month started on a solid footing with Wall Street seeing the best day in a month. Losers turned leaders as the downtrodden financial and tech stocks ricocheted on cues of an improving U.S. economy. Impressive U.S. factory and construction data were behind this new-found optimism.
While the S&P 500 gained about 2.4% and Dow Jones Industrial Average added over 2.1%, about a 4% spike in Apple shares led the Nasdaq Composite to return about 2.9%, making March 1 the best day on the bourses since August 2015. So far this year, both the S&P 500 and the Dow Jones indices are down 3.2% each while the Nasdaq Composite is off 6.4%.
In any case, March is historically known for stellar returns. The average return of the S&P 500 was 1.06% in March, from 1950 to 2015. There were 42 years of a green March while returns were in the red only in 24 years. As per moneychimp.com, only December, April and November beat out March in terms of returns.
Of course, deep-rooted concerns over global growth worries and oil price declines can’t be ignored. But with such a heavy sell-offs suffered year-to-date, chances are high that this March will finally see some relief and end in the green.
Whatever be the case, investors might want to know about the ETF areas that are best suited for the month. For them, below we highlight a few ETFs – some that offer safety and others that have the potential to grow in this rocky environment.
Market Vectors Preferred Securities ex Financials ETF (PFXF)
Since a flight to safety has put a lid on bond yields, investors’ thirst for yield can be satiated by investing in preferred stocks ETFs. These are hybrid securities having the characteristics of both debt and equity. The preferred stocks pay stockholders a fixed, agreed-upon dividend at regular intervals, like bonds. Even if rates rise, an extremely strong yield will allow investors to beat out the benchmark Treasury yields.
The preferred stock fund – PFXF – is heavy on REITs (33.5%) and Electric (22.5%) industries. The fund is up 2.2% year to date (as of March 1, 2016) while its 30-Day SEC yield is 6.26%.
Dynamic Build & Construction (PKB)
The industrial sector enjoys seasonal benefit in March. Also, the space gained investors’ attention afresh after a reading of the U.S. manufacturing sector impressed investors to start the month. If this was not enough, U.S. construction spending expanded to the highest level since October 2007.
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