Newsweek grabbed headlines this week with its bold cover declaring “The Recession is Over.” While not everyone (including the president) agrees with this prognosis, it does seem that at the very least “we’ve stopped the freefall,” to borrow Obama’s words. Unemployment has slowed (although it is yet to reverse course), the decline in GDP was less than originally feared, and Ford even posted its first monthly sales increase in 20 months. If Newsweek is indeed correct (by the way, I would recommend reading the entire article, as it isn’t nearly as joyous as the headline might imply), certain sectors may enjoy continued success in coming months.
In the Newsweek piece, author Daniel Gross proposes that what we need now is a smart, targeted recovery strategy:
“It means eschewing the blunt economic instruments we’ve always used and focusing resources and rhetoric on strategic sectors: renewable energy/green technology, infrastructure, broadband, and health care. It means making investments to run vital systems more intelligently and efficiently, thus creating a new infrastructure on which the private sector can work its magic.”
Although U.S. equity markets have already staged sharp recoveries in 2009, if we do experience a new kind of recovery, certain sectors could be poised for strong performances in the remainder of the year. A look at three ETFs that might benefit from such a scenario:
- Market Vectors Solar Energy ETF (KWT): As the economy has begun to show signs of life, the Obama administration has slowly moved out of “damage control” mode and into “campaign promises” mode, shifting its focus towards fulfilling some of the guarantees made leading up to the election. In addition to healthcare reform, development of alternative energy sources has been a high priority, and will likely continue to be important going forward.
- Merrill Lynch Broadband HOLRDS (BDH): BDH is comprised of companies that are generally involved in various aspects of the broadband industry, including the development and manufacture of products used to facilitate data, video, and voice more quickly than traditional telephone communications. Like most HOLDRS products, BDH is a bit lacking as far as diversification: it’s heavily weighted towards Motorola (MOT, 18%), QUALCOMM (QCOM, 16%), and Corning (GLW, 9%).
- PowerShares Dynamic Building & Construction Portfolio (PKB): Although it maintains a decent allocation to consumer discretionary stocks (including a combined 10%+ to Home Depot and Lowe’s), PKB is heavily concentrated in the industrials sector, including construction and engineering firms such as URS, Fluor, Jacobs, Tetra Tech, etc. If the recovery plays out as Gross seems to hope it might, firms in this space could have some good opportunities to win lucrative projects.
Disclosure: No positions at time of writing.