Published on 29 Sep 2021 on Zacks via Yahoo Finance
5 Top ETF Stories of Nine Months of 2021
U.S. stocks have boomed this year, with the major bourses skyrocketing to new peaks. This is primarily thanks to the reopening of businesses and economies, the largest vaccination drive, an unprecedented stimulus, a huge infrastructure package, resumption of earnings growth and a healing job market. However, inflation fears, the resurgence in COVID-19 cases, taper talks, the potential for high corporate tax rates and signs of a slowdown in China’s economy have kept the stock market edgy.Toward the end of the first nine months of 2021, the S&P 500 is up 15.9%. The Dow Jones and the Nasdaq have gained 12.1% and 12.9%, respectively.Below we discuss some of the hot events of the first nine months of this year that influenced the market in a big way:
Fed Tapering Signals
In the FOMC meeting that concluded on Sep 22, the Federal Reserve Chair Jerome Powell kept the interest rates near zero at 0-0.25% but signaled the tapering of bond-buying, followed by interest rate hikes as early as next year.The central bank is expected to begin scaling back the monthly bond purchases as soon as November and complete the process by mid-2022. This is because it expects the Delta variant of the coronavirus, which has dented economic activity in recent months, to have a short-lived effect on the recovery. Per the officials, the economy will likely make “substantial further progress” by the end of the year, a threshold needed for the central bank to begin slowing the pace of asset purchases (read: ETFs to Bet On as Fed Turns Hawkish, Signals Tapering).The financial sector seems to be the biggest beneficiary of the Fed’s move. This is because the steepening yield curve would bolster profits for banks, insurance companies and discount brokerage firms. This ultra-popular financial ETF — Financial Select Sector SPDR Fund XLF — with a Zacks ETF Rank #1 (Strong Buy) seems a great choice to play this trend. It seeks to provide broad exposure to the financial sector, charging investors 12 bps in annual fees.