Rate Sensitive ETFs To Explode Higher Post Fed Minutes

The Fed minutes from the Jan 29-30 meeting confirms the patient view of the central bank toward future rates hike. The central bank is not in a hurry to raise interest rates this year, citing mounting risks to the U.S. economy, including a slowdown in Chinese and European economies and waning stimulus from 2018 tax cuts.

The Fed last month suspended a three-year movement to raise rates and said that it will keep its short-term interest rates between 2.25% and 2.50%.

In such a scenario, rate sensitive sectors such as utilities and real estate will be the biggest beneficiaries, given their sensitivity to interest rates. Additionally, global headwinds such as still unresolved trade tensions, Brexit, geopolitical tensions and global growth worries are making investors jittery, raising the appeal for the stocks of these sectors. This is because these often act as a safe haven in times of market turbulence and offer higher returns due to their outsized yields.

As a result, investors could make a short-term play on the rate sensitive sectors in the basket form as these will continue to trade smoothly if interest rates remain muted. Below, we have highlighted some ETFs from these sectors that could be excellent plays for investors in the coming weeks. These funds have a Zacks ETF Rank #3 (Hold) with a Medium risk outlook, suggesting potential upside:

Vanguard Real Estate ETF (VNQ - Free Report)

This fund targets the real estate segment of the broader U.S. market. It follows the MSCI US Investable Market Real Estate 25/50 Index and holds 188 stocks in its basket with none accounting for more than 6.1% share. Specialized REITs takes the largest share at 31.5% while retail REITs and residential REITs round off the top three with double-digit exposure each. Expense ratio comes in at 0.12%. VNQ is the most popular and liquid ETFs with AUM of $32.7 billion and average daily volume of more than 7 million shares a day. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

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