As Wall Street continues its impressive run this year, with indices like the S&P 500 and Nasdaq Composite showing remarkable gains, a shift in focus is noticeable. While technology stocks have been the stars of the show, other sectors are now stepping into the limelight, hinting at a broadening market scope. Analysts predict further gains, yet concerns linger about overvaluations post such an astounding rally.
Amidst this backdrop, some investors might find it challenging to pinpoint the hottest sectors currently. To help them navigate this landscape, we present three sectors with a positive Zacks Rank. These sectors and their ETFs might just be the winning picks for the third quarter.
Exploring Potential Sectors & Their ETFs
Delving into the details, let’s explore a few sectors and their respective ETFs that could shine in the upcoming quarter, leveraging insights from the Zacks Sector Rank. This ranking is derived from the average Zacks Rank of all stocks within a sector, helping to assess its relative strength and position. With the top sectors demonstrating higher Zacks Ranks, they present promising investment opportunities.
Curious to know more? Keep reading!
Industrials – An Upbeat Outlook with a Zacks Rank #2
The industrials sector is poised for growth as business conditions improve and demand remains robust. With around 70% of industries falling under the top-ranked category, including electronics, procurement and fabrication, steel-pipe and tube, this sector is one to watch. Notably, the sector’s forward P/E stands at 17.25X, lower than the S&P 500, with projected EPS growth of 8.27%, outpacing the broader market. The Industrial Select Sector SPDR XLI, boasting a Zacks Rank #2, stands out as a favorable choice.
Construction – Promising Prospects with a Zacks Rank #3
Despite challenges in the U.S. housing sector due to soaring prices and high mortgage rates, the overall construction sector appears attractive. Many industries within this sector, such as homebuilders, air conditioners and heating, reflect positive earnings estimate revisions. Currently undervalued compared to the S&P 500, the construction sector offers a higher projected EPS growth rate. Investors looking to capitalize on this sector can consider the Invesco Building & Construction ETF PKB as a strategic play.
Aerospace – A Sector on the Verge of Transformation with a Zacks Rank #5
While the aerospace sector experienced lackluster performance in the first half of 2024, there are indications of a potential turnaround. Despite being slightly overvalued relative to the S&P 500, the sector’s projected EPS growth rate of 18.19% surpasses the market benchmark. Positive fundamentals, driven by rising geopolitical tensions and increased defense spending globally, position the sector for growth. The iShares U.S. Aerospace & Defense ETF ITA, with a Zacks Rank #2, emerges as a compelling investment choice.
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