5 Sector ETFs Hitting New Highs Amid Market Volatility

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The U.S. stock market has been on a smooth ride though concerns over rising inflation and lofty valuations in growth tech stocks weighed on investors’ sentiment. A key inflation indicator — the core personal consumption expenditures price index — jumped 3.1% year over year in April — the highest in nearly three decades.

Although inflation is high, the Fed views this as temporary. The central bank is buying at least $120 billion of bonds each month and has kept benchmark short-term rates near zero. As millions of Americans are now fully vaccinated and pandemic restrictions are being rolled back, the U.S. economy is on a strong recovery path.

Additionally, huge infrastructure spending as well as massive fiscal and monetary stimulus is instilling strong confidence in the economy. The combination of factors is leading to pent-up demand for all types of products and services in the economy. Thus, the sectors poised to benefit the most from such a trend have been enjoying a huge ascent and are outperforming.

Further, lower interest rates make borrowings cheaper, providing a boost to both investment in new projects and repayment of higher-rate debt. Consequently, it leads to strong economic growth and is thus a boon for the stock market. The bouts of latest data also instilled strong confidence in economic growth. U.S. manufacturing activity hit a record-high in May for the second straight month supported by stronger expansion in output and new orders. Meanwhile, the core personal consumption expenditures index increased by 3.1% in April from a year ago — the highest reading since 1992 and sharply higher than the March reading of 1.9%.

Against this backdrop, we highlighted a number of ETFs from various sectors that are hitting new highs in the last couple of sessions. Any of these could be excellent plays for investors looking to ride out the bullish trend in the coming months given their high momentum and the favorable Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

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