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Following three consecutive monthly losses since the COVID pandemic began in March 2020, Wall Street recorded a robust recovery starting in November. The majority of these gains were fueled by optimism caused by moderately dovish remarks made by Federal Reserve Chairman Jerome Powell.

Investors responded positively to Powell's "somewhat dovish" position regarding the trajectory of monetary policy, which eased concerns about interest rates remaining elevated for an extended period compared to initial expectations.

Given this, we have highlighted ETFs from different zones that have plunged the most over the past three months but have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). Notably, the S&P 500 is up about 9.6% in the past three months.

Energy – iShares U.S. Oil & Gas Exploration & Production ETF (IEO) – Zacks Rank #1; Down 3.5% in Past Three Months

The Organization of Petroleum Exporting Countries (OPEC) maintains a hopeful stance on the oil market's future, despite recent challenges. According to OPEC's December Oil Market Report, the demand for crude oil is expected to outpace the supply increase from non-OPEC sources. This optimism persists even amidst a recent decline in oil prices, which OPEC attributes to speculative actions and overblown concerns.

Given OPEC’s strong expectations for oil demand, the current price level of around $75 per barrel presents an attractive opportunity. Investors with a long-term perspective can potentially benefit from investing in high-quality oil companies at these prices (read: Oil & Energy ETFs Likely to Rebound in 2024: Here's Why).

Healthcare – iShares U.S. Pharmaceuticals ETF (IHE) – Zacks Rank #2; Down 2.9%

The sector boasts a safe-haven status amid market uncertainty related to the Fed’s next move and geopolitical crisis. Against this volatile backdrop, medical/healthcare investing makes sense. The job growth in the sector remains decent.

Per Earnings Trends issued on Dec 20, 2023, earnings from the Medical sector is likely to decline 20.8% in Q4 of 2023, fall 0.4% in Q1 of 2024, rise 23.1% in Q2 of 2024 and increase 15.3% in Q3 of 2024. It shows that from the second quarter of 2024, the sector's performance is expected to improve when compared to the S&P 500.

Revenues are likely to record 3.7% growth in Q4 of 2023, 4.8% growth on Q1 of 2024, 5.7% uptick in Q2 of 2024 and 6.5% rise in Q3 of 2024. This trend in revenue growth is roughly consistent with that of the S&P 500.

High Dividend – iShares Core High Dividend ETF (HDV) – Zacks Rank #2; Down 1.3% in Past Three Months

Dividend stocks normally underperform in a rising rate environment. Dividend fund iShares Select Dividend ETF (DVY) is off 4.4% this year. With the Fed will likely to cut rates in 2024, high dividend stocks and ETFs may rebound.

This is because even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.

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