ETF Investing Strategies For 2H 2023

Chart, Trading, Courses, Forex, Analysis

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In this episode of ETF Spotlight, I speak with Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors (SSGA). We discuss the market outlook and the best strategies for the second half of 2023.

The S&P 500 is now up about 15% year-to-date, while the tech-heavy Nasdaq has surged almost 38%. The rally is being driven mainly by mega-cap stocks that have benefited from optimism about artificial intelligence, as well as investors' search for safety amid rising uncertainties.

Most economists expect a recession in the US later this year or early next year. It remains to be seen if the rally can continue despite macroeconomic and earnings risks. The SSGA team recommends moving up in quality in the US and rotating overseas, and diversifying recession risks with cyclicals and defensives.

The SPDR S&P Dividend ETF (SDY - Free Report) selects companies that have consistently increased their dividend for at least 20 consecutive years. Walgreens Boots Alliance (WBA - Free Report) and 3M (MMM - Free Report) are among its top holdings.

The iShares MSCI USA Quality Factor ETF (QUAL - Free Report) and the SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) provide exposure to high-quality stocks. Apple (AAPL - Free Report), Microsoft (MSFT - Free Report), and Nvidia (NVDA - Free Report) are the top holdings in these ETFs.

Homebuilders have significantly outperformed the S&P 500 index this year. However, after a 30% plunge in 2022 and an improving earnings outlook, these stocks still look attractively priced on a price-to-earnings (P/E) and price-to-book (P/B) basis. Take a look at the iShares U.S. Home Construction ETF (ITB - Free Report) and the SPDR S&P Homebuilders ETF (XHB - Free Report).

In the fixed-income space, Matt recommends short-duration ETFs given their elevated yields, and actively managed ETFs that can navigate evolving monetary policy and mixed fundamentals.

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