September is historically the worst month of the year for stocks. According to moneychimp.com, a consensus carried out from 1950 to 2023 has revealed that September ended up offering positive returns in 32 years and negative returns in 42 years, with an average return of negative 0.87%, which is worse than any other month.
Terrifying financial events like the start of the Great Depression in 1929 or the fall of Lehman Brothers in 2008 all crept up in the month of September. This September could be different due to the chances of a Fed rate cut in the United States. All these make it more important to pinpoint ETFs that have the power to move ahead this September.
Rate Cuts Could Ward Off September Slump
The Fed is likely to cut rates in September.There is currently a 70% probability of a 25-bp rate cut in September (at the time of writing), per CME FedWatch Tool. If the Fed eases its policy, the greenback will likely lose strength and bond yields will fall.
As the Q2 earnings season concludes, the overall earnings picture remains stable, with management teams largely providing a positive perspective on the economic situation. There are talks that the investments in artificial intelligence (AI) are being delayed, but the AI boom is very much in place.This is the backdrop against which investors have entered September.
Against this backdrop, below we highlight a few exchange-traded funds (ETFs) that can be tapped for gains in September.
ETFs in Focus for September
SPDR Portfolio S&P 500 Growth ETF SPYG – Zacks Rank #2 (Buy)
The large-cap growth corner of the broad investing world has been an area to watch lately. A decent earnings growth outlook, optimism over potential interest rate cuts and the AI craze could drive the rally. In particular, growth stocks tend to outperform in a trending market (i.e., a market characterized by a prolonged uptrend).
ALPS OShares U.S. Quality Dividend ETF OUSA – Zacks Rank #2
The underlying OShares U.S. Quality Dividend Index measures the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States. The fund charges 48 bps in fees. The fund has a Zacks ETF Rank #2. Dividend investing offers great safety in any kind of economic doldrums.
VanEck Retail ETF RTH – Zacks Rank #2
A lot of factors are favoring this sector. A decent consumer sentiment level, strong labor market and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector should perform in a low-rate environment. The retail sales momentum too has been decent.
Invesco AI and Next Gen Software ETF IGPT – Zacks Rank #1 (Strong Buy)
Delayed payoffs or not, the AI euphoria is in fine fettle. The demand for cloud is also strong. The underlying STOXX World AC NexGen Software Development Index comprises companies with significant exposure to technologies or products that contribute to future software development through direct revenues.
First Trust NASDAQ Cybersecurity ETF CIBR
The shift toward cloud computing and the adoption of zero-trust security models have led to high demand for advanced cybersecurity. Heightened geopolitical tensions also led organizations to seek protection for their digital assets and adopt more and more cybersecurity solutions (read: Cybersecurity ETFs Won in August Despite Tech Volatility).
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Get it free >>VanEck Retail ETF (RTH): ETF Research Reports
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
ALPS (OUSA): ETF Research Reports
SPDR Portfolio S&P 500 Growth ETF (SPYG): ETF Research Reports
Invesco AI and Next Gen Software ETF (IGPT): ETF Research Reports
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