Lara Crigger, editor-in-chief of ETF Trends and ETF Database, recently appeared on TD Ameritrade to discuss earnings season sentiment so far in 2022, inflation defensive sectors to watch, and tech investing with host Nicole Petallides.
Crigger explains that investors are “on edge” in current markets, with Netflix’s reporting of a loss of subscribers and the news of Elon Musk seeking to purchase Twitter overshadowing what has thus far been a reasonably solid earnings season. With the FAANG companies primarily reporting earnings this week, Crigger warns that it’s important not to lose sight of the larger macro picture.
Metrics such as PCE (personal consumption expenditure), GDP, and inflation are going to “indicate whether we’re entering something that’s a real economic slowdown or whether this is all just a momentary blip,” Crigger says.
Areas of potential opportunity to watch are the inflation defensive sectors such as energy and materials, and if advisors and investors are looking for exposure to oil, Crigger recommends oil stocks over spot oil exposure because of the upside capture potential that equities can provide when energy prices are rising.
The VanEck Oil Services ETF (OIH ) is a fund that focuses on oil refiners and equipment manufacturers instead of the producers themselves, companies that can benefit from higher energy prices but don’t feel the direct impacts of the daily volatility of oil prices themselves. The fund also provides the potential for dividends, a popular strategy in current markets.
On the materials side, Crigger is keeping a watchful eye on the Invesco S&P 500 Equal Weight Materials ETF (RTM ).
“I like this fund for three reasons; one is materials, which absorb the impact of high inflation better than other sectors — we know that inflation isn’t going anywhere. Secondly, RTM is a broad-based fund, so you’re getting exposure to different segments within materials, not just chemicals or just paper,” Crigger explains. “And finally, it’s equal-weighted, which means that you’re not holding only just a handful of big names.”
Equal weighting has been a popular strategy of late, and RTM has outperformed many of the market-weighted ETF peers thus far this year.
Housing Metrics and Tech Investing
Crigger expresses concerns over the Case-Shiller Index, reporting a 20% year-over-year growth, with skyrocketing house prices putting a potential damper on the space looking ahead.
“Yes, people are buying houses, but they’re also trying to buy houses before mortgage rates start to rise again,” Crigger says.
Touching on the tech-heavy FAANG stocks such as Alphabet, Microsoft, and Meta, which are all due to report this week, Crigger believes that investors should exercise caution when investing in these stocks in current markets but that there will continue to be opportunities to buy the dip, and that investors should capitalize on that when able.
“There’s going to be a lot of opportunities to buy the dip, and keep buying,” Crigger says, “when you find those opportunities arise.”
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