Sector ETFs, shares to buy

After the worst week for the US stock market since the 2008 financial crisis caused by the rapidly spreading coronavirus, central banks around the world are expected to step in to support the virus-infected economy (read: 6 equity ETFs surviving the market correction).

In particular, the Federal Reserve at its March 17-18 meeting last week signaled its willingness to lower interest rates to support the economy. According to the latest CME FedWatch Tool, there is a 100% chance the Fed will cut interest rates in March, while the federal funds futures market predicts a more than 70% chance of a rate cut. Goldman Sachs expects the Fed to cut interest rates by 75 basis points (bps) between March and June. Bank of America is considering a 50 basis point cut.

Stimulus hopes will be a solid catalyst for stocks in the coming weeks.

Grace for sectors

In a lower interest rate environment, the biggest beneficiaries will be high-dividend sectors such as utilities and real estate due to their sensitivity to interest rates. This is especially true because they offer higher returns due to their outsized returns. Additionally, securities in capital-intensive sectors such as telecommunications would benefit from lower rates. Moreover, lower interest rates will lower borrowing costs, leading to higher consumer spending and increased economic activity. This, in turn, will translate into increased profitability in various segments. Businesses will also face lower interest rates over time (read: ‘At least 3 interest rate cuts’ by December? Sector ETFs to play).

Meanwhile, gold mining stocks will also gain in value given that they are leveraged plays on the underlying metal. Rate cuts would increase the attractiveness of this metal, causing the price of the metal to increase.

With this in mind, we’ve highlighted ETFs and stocks from sectors that are expected to see explosive growth amid lower interest rates.

Property

Schwab US REIT ETF SCHHwith AUM of $5.7 billion and average daily trading volume of 725,000 shares, it offers broad exposure to the real estate sector. It carries a Zacks ETF Rank of 3 (Hold) with a medium-risk outlook (read: ETF Strategies to Mark as Covid-19 Waking Up Recession Fears).

With a market capitalization of $62.3 billion, Prologis Inc. PLD is a leading industrial REIT that acquires, develops, operates and manages industrial properties in the Americas, Asia and Europe. This Zacks Rank #2 (Buy) stock is expected to post earnings growth of 12.4% this year.

Tools

Zacks Rank #2 (Buy). Tools Select SPDR XLU sector provides exposure to companies from the electricity, gas and multi-purpose industries as well as independent energy producers and energy traders. It has amassed an asset base of $11.2 billion and trades an average of 16.6 million shares a day (read: Record Low Yield: 4 Sector ETFs to Buy).

Duke Energy Corporation DUK is a diversified energy company with a broad portfolio of domestic and international natural gas and electric power businesses, as well as regulated and unregulated businesses that supply, deliver and transform energy in North America and select international markets. The company is expected to report earnings growth of 1.6% this year. The stock has a Zacks Rank #2 and a market capitalization of $67.3 billion.

Home builders

SPDR S&P Homebuilders ETF XHB provides exposure to the residential construction segment with well-diversified exposure to construction products, home furnishings, home furnishings retail, home furnishings retail and home appliances. It is the most popular option in the homebuilding industry with AUM of $734.7 million and average daily volume of 1.8 million shares. The product charges 35 basis points in annual fees and has a Zacks ETF Rank of #2 (read: Here’s Why You Should Buy Home Builder ETFs Now).

PulteGroup Inc. PHM engages in home construction and financial services, primarily in the United States. This year, the company is expected to post earnings growth of 18.3% and earn a Zacks ETF Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gold mining

VanEck Vectors Gold Miners ETF GDX is the most popular and most actively traded gold mining ETF with an AUM of $11.7 billion and average daily volume of approximately 56.6 million shares. Canadian companies make up half of the portfolio, with the United States (18.2%) and Australia (14.3%) rounding out the top three. The fund charges annual fees of 52 basis points.

With a market capitalization of $20.4 billion, Franco-Nevada FNV Corporation operates as a gold licensing and streaming company with additional interests in silver, platinum group metals, oil and gas and other commodity assets. In 2020, the stock is expected to post earnings growth of 30.7% year-over-year and earn a Zacks Rank of #2.

Want key ETF news delivered straight to your inbox?

The free Zacks Funds Newsletter will highlight top news and analysis, as well as top-performing ETFs, each week. Download for free >>

Click to receive a free report Prologis, Inc. (PLD): Free PulteGroup, Inc. Stock Analysis Report. (PHM): Free Stock Analysis Report Duke Energy Corporation (DUK): Free Stock Analysis Report Franco-Nevada Corporation (FNV): Free Stock Analysis Report Tools Select Sector SPDR ETF (XLU): ETF Research Reports SPDR S&P Homebuilders ETF (XHB): ETF Research Reports Schwab US REIT ETF (SCHH): ETF Research Reports VanEck Vectors Gold Miners ETF (GDX): ETF Research Reports To read this article on Zacks.com, click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report