With the passage of Q1, everyone may have shifted attention to Q2 but given the heightened volatility in the global market and new shocks or surprises every day, taking a near-term approach may be warranted. Thus, for investors looking for the prospective winners of the first month of Q2, we will highlight a few investing options.
In any case, April is historically known for stellar returns. The average return of the S&P 500 was 1.36% in April, from 1950 to 2015. There were 45 years of a green April while returns were in the red only in 21 years. As per moneychimp.com, only December beat out April in terms of returns.
Of course, innate concerns over global growth and oil price declines have the potential to derail this stunning historical performance this year. But with such a heavy sell-off in the first two months of 2016 and occasional retreats afterward, chances of a solid rebound are high at the current level.
Following are a few ETFs that either offer safety and or have the potential to grow after a beaten-down Q1.
Low-Beta – PowerShares Russell 1000 Low Beta Equal Weight ETF (USLB)
The fund comprises 307 stocks that exhibit relatively low beta. Plus, the stocks have negligible concentration risk and are weighted equally. Beta measures the price volatility of the stocks/funds relative to the overall market. A stock with a high beta tends to be more volatile than the market and vice versa. Thus in a choppy market, low beta ETFs offer greater safety. Financials (21.3%) and consumer discretionary (16.3%) are top two sectors of the fund. The fund charges 35 bps in fees.
technology – SPDR S&P Software & Services ETF (XSW)
Investors should note that technology stocks and ETFs had a sluggish Q1. Though the space is yet to return with full force, a few corners of it are showing promise. Among the few, computer software and the services segment are worth a mention. The segment is expected to post 11.6% growth in the first-quarter 2016 earnings season, which is quite noteworthy given the negative growth rates projected for the other tech segments (apart from telecommunication services).
Investors can thus have a look at XSW which targets the software sub-industry portion of the S&P Total Stock Market Index. The Software Index is a modified equal weight index. The 174-stock fund charges 35 bps in fees. Notably, this Zacks Rank #2 stock has lost 5.6% so far this year (as of April 4, 2016) and may be poised for a reversal in Q2.
Transportation – SPDR S&P Transportation ETF (XTN)
