Published on 28 May 2024 on Zacks via Yahoo Finance

Invest in These Quality ETFs Amid Rate Cut Uncertainty

All three major indices are at their record highs, buoyed by solid corporate earnings, Fed rate cut bets and booming AI. The rally is expected to continue but the uncertainty about the timing of Fed rate cuts might weigh on investors sentiment.In such a scenario, investors should focus on high-quality investing. Quality stocks possess a sustainable competitive advantage and demonstrate consistent growth, profitability and operational excellence over time. While there are several funds available in the space, we have chosen the five most popular ETFs targeting the niche strategy. These are iShares MSCI USA Quality Factor ETF QUAL, Invesco S&P 500 Quality ETF SPHQ, JPMorgan U.S. Quality Factor ETF JQUA, FlexShares Quality Dividend Index Fund QDF and SPDR MSCI USA StrategicFactors ETF QUS.Quality ETFs often provide a hedge against market volatility and uncertainty.

Bull Vs. Bear

Wall Street is getting more bullish on stocks, given the improving outlook for both earnings and economic growth. Over the past two weeks, three equity strategists tracked by Yahoo Finance have boosted their year-end targets for the S&P 500. The median target on Wall Street for the benchmark index now sits at 5,250, up from the median target of 4,850 on Dec 30, per Bloomberg data.BMO Capital Markets boosted the year-end price target for the S&P 500 to 5,600 from 5,100, becoming the most bullish analyst on Wall Street. Deutsche Bank raised the price target to 5,500 for this year from 5,100, citing strong corporate earnings to support equity valuations. In fact, it has the highest target among the major brokerages (read: ETFs to Bet on Analysts' Bullish Forecast for S&P 500).One of Wall Street’s most prominent bears, Morgan Stanley, also turned positive on the outlook for U.S. stocks by lifting the price target for the S&P 500 to 5,400 from 4,500. It now expects the index to rise 2% this year, a major turn in its view that the benchmark will tumble 15% by December.Earnings grew 6% in the first quarter of 2024, the highest rate of growth seen in nearly two years. Hopes for rate cuts, continued AI adoption as well as strong earnings growth projections are expected to drive the stocks higher.However, the latest Fed minutes highlight concerns over stubborn inflation. While inflation has eased over the past year, it failed to show further progress toward the Fed’s 2% objective in recent months. As such, the disinflation process would likely take longer than previously thought, per Fed minutes. Markets are now pricing in a 49.4% chance for a rate cut at the Fed's September meeting, down from 54.8% a week ago, according to the CME's FedWatch Tool. Additionally, geopolitics will continue to be an overhang.