The signs are all there. U.S. GDP in the first quarter rose, the
joblessness situation is slowly improving, consumers are coming out
to spend more and homebuilders are feeling more bullish than they
have in awhile. That just leaves one thing: which exchange traded
funds (ETFs) will give you exposure to our recovery?
The data for the U.S. economic recovery has been favorable: GDP
rose 3.2% in the first quarter, jobless claims are down almost 27%
year-over-year and the total number of people collecting
unemployment benefits is also declining,
comments Kevin Grewal for TheStreet
. Additionally, March new home sales jumped 27%, orders for
non-transportation durable goods are up and first-quarter corporate
earnings were better-than-expected. The International Monetary Fund
) has revised upward its forecast for U.S. 2010 GDP growth to
Despite impressive first-quarter earnings, equities still remain
cheap. The S&P 500 index is only trading at a price-to-earnings
ratio of around 14, its lowest P/E ratio in the last 20 years.
Grewal has noted four sectors that are more sensitive to changes in
the overall economy and are likely to grow with a recovering
economy, and we've added in some of our own ideas, as well:
. A better economy means more goods are shipped, traveling
increases and consumers will want to purchase new vehicles. The
iShares Dow Jones Transportation Average (NYSEArca:
is a play on this cyclical sector, providing exposure to package
carriers, freight carriers and airliners. [
Merger Talks Between Airliners.
Demand for durable goods will likely increase and the
Industrial Select Sector SPDR (NYSEArca:
is a good way to gain exposure to the manufacturing sector. [
Top ETFs to Play The Growing Industrial
. An expanding economy generally means more business for
construction companies as consumers seek new housing.
Furthermore, the government is throwing billions into the sector
for infrastructure projects. The
PowerShares DB Building & Construction (NYSEArca:
includes construction services companies, building materials
companies and isn't solely focused on homebuilders.
. Consumers spend more during better economic times, which is one
of the reasons why corporate sales have been looking good lately.
Consumer Discretionary Select Sector SPDR (NYSEArca:
is one play on the sector. [
Wholesale Inventory Gains Give ETFs an Early Leg
Industrial metals are especially well-positioned to benefit in a
recovery. Silver, copper, steel, platinum, palladium - they all
have varied and wide-ranging uses. As the economy gets better,
expect that many builders will be using these metals to install
pipes, wires and more.
SPDR S&P Metals & Mining (NYSEArca:
will give you exposure to the companies that produce some of
These are just a few ideas, but look around - there are hundreds
of ETFs and dozens of ways to play the economic rebound. Exploring
these sectors should get you started. If you have your own idea to
play the recovery, feel free to share it in the comments!
For full disclosure, Tom Lydon's clients own shares of
Max Chen contributed to this article.