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After a turbulent start to August on the tech sell-off, Wall Street recently regained some momentum. However, it continued to witness wild swings throughout the month. The Dow Jones touched new highs for the third time this week, rising 2.4%, while the S&P 500 and Nasdaq Composite Index gained 2.7% and 1.9%, respectively.

While recession fears will likely keep investors on edge in the early part of the month, bets over Fed rate cuts in September may fuel optimism in the stock market in the latter half. We have highlighted five top-performing ETFs from different sectors that were the leaders in August.

These are SPDR S&P Telecom ETF (XTL - Free Report), iShares MSCI Global Gold Miners ETF (RING - Free Report), First Trust Nasdaq Lux Digital Health Solutions ETF (EKG - Free Report), Reaves Utilities ETF (UTES - Free Report), and Residential REIT ETF (HAUS).

Federal Reserve Chair Jerome Powell signaled that interest rate cuts are coming in September, citing easing inflation and a weakening job market. U.S. annual inflation dipped below 3% annually in July for the first time since 2021, and the labor market cooled in July as the economy added 114,000 jobs, 35% fewer than expected. Unemployment rose to 4.3% — the highest since October 2021 — and represented the fourth consecutive monthly increase. U.S. manufacturing activity dropped to an eight-month low in July amid a slump in new orders.

At the Jackson Hole symposium last week, Powell said “the time has come” to lower borrowing costs in the light of a diminishing upside risk to inflation and moderating labor demand. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

The probability of a 25-bps rate cut stands at around 69.5%, while that of a 50-bps cut is at approximately 30.5%, according to the CME Group's FedWatch tool. Swap traders are pricing in about 100 basis points of easing this year, which implies a reduction at every remaining policy meeting through December, including one 50-bps cut.

Lower rates generally lead to reduced borrowing costs for mortgages, credit cards, and other consumer and business loans. This helps businesses to expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.

Lower rates primarily benefit cyclical sectors like industrials, financials, and consumer discretionary. Securities in capital-intensive sectors like telecom will also benefit from lower rates as businesses will face lower loan rates over time.

Additionally, lower rates raise gold's attractiveness when interest rates fall compared to fixed-income assets such as bonds, as the precious metal does not pay interest like fixed-income assets.

Now, let’s dig into the details of the above-mentioned ETFs.

SPDR S&P Telecom ETF (XTL - Free Report) – Up 11.1%

The SPDR S&P Telecom ETF provides exposure to the telecommunications segment and follows the S&P Telecom Select Industry Index. It holds 39 stocks in its basket, with communications equipment making up 52% of the assets, while alternative carriers and integrated telecommunication services round off the next two spots with double-digit exposure each.

The ETF has amassed $86.6 million in its asset base, and it charges 35 bps in annual fees. It trades in a lower average daily volume of 10,000 shares, and it has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares MSCI Global Gold Miners ETF (RING - Free Report) – Up 9.5%

The iShares MSCI Global Gold Miners ETF offers exposure to companies that derive the majority of their revenues from gold mining. It follows the MSCI ACWI Select Gold Miners Investable Market Index, and it holds 35 securities in its portfolio. Canadian firms take more than half of the portfolio, while the United States takes the next spot at 23% share.

This fund is the cheapest choice in the gold mining space, charging just 39 bps in fees and expenses. It has been able to manage assets worth $550.5 million, and it trades in a good volume of 182,000 shares per day.

First Trust Nasdaq Lux Digital Health Solutions ETF (EKG - Free Report) – Up 9%

The First Trust Nasdaq Lux Digital Health Solutions ETF offers exposure to 44 companies that are primarily engaged in and involved with the intersection of healthcare and technology ("Digital Health Companies"). It follows the Nasdaq Lux Health Tech Index, with key holdings in medical equipment and services, health care providers, and the pharmaceuticals and biotechnology industry.

The ETF has accumulated $2.5 million in its asset base, and it trades in a volume of around 6,000 shares a day on average. It charges 65 bps in annual fees.

Reaves Utilities ETF (UTES - Free Report) – Up 8.8%

The Reaves Utilities ETF is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utility stocks. It holds 21 stocks, with a heavy concentration on the top three firms.

The fund has AUM of $130.4 million and an average daily volume of 33,000 shares. It also charges 49 bps in annual fees.

Residential REIT ETF (HAUS) – Up 7.7%

The Residential REIT ETF is actively managed, and it is the only ETF with an active pure-play U.S. residential real estate strategy. It invests in publicly traded REITs that derive their revenues from ownership and/or management of residential properties, and it holds 24 stocks in its basket.

The ETF has AUM of $6.1 million, and it charges 60 bps in fees per year from investors. It trades in an average daily volume of 5,000 shares.

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