5 Top-Ranked ETFs To Bet On After An Encouraging May

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Wall Street had a decent run on the bourses in May despite intensifying concerns about the rising inflation levels. The Dow Jones Industrial Average rose 1.9% last month. Moreover, there was a 0.6% increase in the S&P 500 Index during May.

Both the broader indices saw their fourth straight positive month. Moving on, the small-cap index Russell 2000 climbed 0.1% in the same period witnessing its eighth consecutive positive month. The index also saw its longest monthly win streak since 1995.

However, the tech-heavy Nasdaq composite slid 1.5% on inflation concerns. Notably, a dovish Fed, strong corporate earnings data, and an accelerated coronavirus vaccine rollout kept investors optimistic about a faster U.S. economic growth recovery.

Encouragingly, the pandemic seems to be getting under control in the United States. The decline in the number of coronavirus cases led to a bullish sentiment among the market participants toward a speedy reopening of the U.S. economy. Further, the latest public health guidelines issued by the CDC relaxed restrictions on wearing masks at indoor and at public gatherings. Per a CNBC article, the new recommendations suggest that completely vaccinated people do not need to wear masks or maintain a six-feet distance from others during indoor or outdoor activities.

Buoying optimism, President Joe Biden recently announced his vaccination goals. He aims at administering at least a single dose of coronavirus vaccine to 70% U.S. adults along with getting 160 million adults completely immunized by Jul 4, according to a CNBC report.

Moreover, a change in consumer behavior and shopping patterns is being clearly observed as Americans are visiting stores for shopping merchandise like new clothes, which signal the return of normalcy. Large retailers like Walmart (WMT), Target (TGT), Home Depot and Macy’s have been gaining from the gradual resumption of economic activities.

Notably, the manufacturing industries that were doing well during the pandemic are still maintaining their impressive performances. Per the Fed’s recently-released data, the total industrial production inched up 0.7% in April. Also, there was a 0.4%, 0.7%, and 2.6% rise, respectively, in the manufacturing output, mining, and utilities production.

The latest U.S. consumer confidence data looks decent as the metric was steady in May after registering gains in April. The Conference Board's measure of consumer confidence index stands at 117.2 for May, almost flat with April’s reading of 117.5.

However, investors will be eagerly waiting for the Federal Reserve’s FOMC meeting scheduled for Jun 15-16.  They may have to also worry about certain factors like increasing inflation levels, tension surrounding the Fed’s chances of trimming the monetary stimulus earlier than expected, and the brewing possibilities of a tax hike in the coming months, per a CNBC article. Against this backdrop, here are some top-ranked ETFs that investors can bet on:

Fidelity MSCI Materials Index ETF (FMAT Quick Quote FMAT - Free Report)

The materials sector, which is most sensitive to global economic growth expectations, is gaining from a dovish Fed. Lower rates put pressure on the U.S. dollar that makes dollar-denominated materials cheap for foreign investors, raising demand for products that these companies sell. Also, as the sector is highly dependent on interest rates for capital expenditures, low rates are a boon. This ETF looks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Materials Index. It charges 8 basis points in annual fees. The fund carries a Zacks ETF Rank #1 (Strong Buy).

First Trust Nasdaq Bank ETF (FTXO Quick Quote FTXO - Free Report)

The banking sector is gaining traction from investors’ increasing attention as the prospects of the space look bright amid the rebounding U.S. economy. Notably, the Institute of International Finance (IIF) expects U.S. banks to report “record level” earnings in 2021, per a CNBC article. The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the Nasdaq US Smart Banks Index. The index is a modified factor weighted one, designed to provide exposure to U.S. companies within the banking industry. It charges 0.60% in expense ratio and carries a Zacks ETF Rank #2 (Buy).

Vanguard Industrials ETF (VIS Quick Quote VIS - Free Report)

The industrial sector, which faced disruption in global supply chains and factory closedowns, is expected to bounce back from the pandemic slump. The re-opening of the U.S. economy accelerated coronavirus vaccine distribution, and the addition of fiscal stimulus are expected to drive demand and economic activities in the sector. The fund tracks the MSCI US Investable Market Industrials 25/50 Index and has an expense ratio of 0.10%. It has a Zacks ETF Rank #1.

The Energy Select Sector SPDR Fund (XLE Quick Quote XLE - Free Report)  

The energy sector bled profusely due to the pandemic-induced historically low oil-price levels, thanks to the dual blows of low demand and surplus supplies. Notably, a surge in coronavirus cases weighed on oil demand. However, reduction in oil supply, an expanded fiscal relief, ramp-up in industrial production, and a weak dollar as the Fed remained dovish are working in favor of oil prices and will continue to boost the sector as the U.S. economy is showing signs of recovery. XLE aims to provide investment results that before expenses, correspond generally to the price and yield performance of the Energy Select Sector Index. The fund charges 0.12% in expense ratio and carries a Zacks ETF Rank #2.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS Quick Quote FDIS - Free Report)

The increase in direct payments to the Americans comes as a ray of hope for players in the consumer discretionary sector, which attracts the bulk of consumer spending. The fund intends to provide investment results that before expenses correspond generally to the price and yield performance of the MSCI USA IMI Consumer Discretionary Index. It has an expense ratio of 8 bps and carries a Zacks ETF Rank #2.

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