3 ETF Sectors Hitting 52-Week Highs After Fed Rate Cut

The Federal Reserve started the new rate cycle era last week, infusing strong optimism in various areas of the global markets and commodities. Wall Street has been hovering around a 52-week high. While the gains were broad-based, some areas were the biggest gainers and hit a 52-week high each on Sept. 20, 2024. We have highlighted three ETF areas that came to the forefront due to the Fed-induced rally.

Inside the Latest Fed Rate Cut

On Wednesday, the Fed announced a 50-basis-point cut in interest rates, marking its first reduction since March 2020. The new benchmark policy rate now stands between 4.75% and 5.00%. The rate cut was widely anticipated, though there was uncertainty over its size. A 25-basis-point reduction was expected by many, but softer-than-expected economic data led to calls for a larger cut. Ultimately, the Fed opted for the half-percentage-point reduction.

Further Rate Cuts Expected by Year-End

The Federal Open Market Committee’s (FOMC) “dot plot” of individual officials’ projections indicates the possibility of another 50 basis points of cuts by the end of the year, aligning with market expectations. The committee also forecasts an additional percentage point of cuts by 2025 and another half-point cut by 2026, eventually reducing the benchmark rate by 2 percentage points.

Against this backdrop, below we highlight a few winning exchange-traded funds (ETF) areas.

Winning ETF Sectors

Utilities ETF

The Utility sector tends to be stable and provides consistent dividends. This sector also performs better in a low-rate environment. Virtus Reaves Utilities ETF UTES, S&P 500 Utilities Sector SPDR XLU and Fidelity Utilities MSCI ETF FUTY are the utilities ETFs that hit a 52-week high on Sept. 20, 2024 (read: Fed Cuts Rates by 50 Basis Points: Sector ETFs to Play).

India ETF

India ETFs are also hitting highs. Franklin India ETF FLIN, India Internet & Ecommerce ETF INQQ, First Trust India Nifty 50 Equal Weight ETF NFTY and Columbia India Consumer ETF (INCO), probably saw a spike on the likelihood of a falling U.S. dollar.

India's potential for growth makes it an attractive choice for investors. Recent upgrades in growth forecasts for the country, driven by robust public investment and strong private consumption, have boosted the prospects for these ETFs.

Consumers in India are expected to increase their spending on both essential and non-essential items per the country’s central bank, a trend likely to continue over the next year. The forecasted rise in consumer consumption in the upcoming festive season is a tailwind.

Gold ETF

Gold bullion ETFs like iShares Gold Trust Micro IAUM, GraniteShares Gold Trust Shares (BAR), Vaneck Merk Gold ETF OUNZ and Physical Gold ETF SGOL have hit a 52-week high lately. As the Fed eased its policy, the greenback lost strength and bond yields fell. Both factors should go in favor of gold investing.

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