A handful of theme-based opportunities for investors are firming up.
Owning individual stocks can certainly be exciting. If you’ve been an investor for any time at all, however, you also know that picking companies and then keeping tabs on them can be a lot of complicated work. There may be other things you’d rather devote your time and energy to instead.
If so, there’s an easy solution: buying and holding theme-based baskets of stocks. You know them better as exchange-traded funds (ETFs). These investments let you fine-tune your allocation strategy without forcing you to pick any individual equities. That’s why they’re also low-maintenance investments.
These four ETFs each follow different strategies, but all of them look like particularly attractive prospects this month.
Value stocks
For the better part of the 21st century, growth stocks like Nvidia and Amazon have dominated the headlines. And understandably so — they’ve consistently led the market higher during this time.
One of the key factors underpinning their strength, however, has recently and dramatically changed: interest rates. After years of abnormally low rates — a condition that favors growth stocks — interest rates are finally back in the neighborhood of their long-term norms. This tidal shift works against debt-reliant growth companies, but works in favor of the companies that are usually categorized as value stocks.
Enter the Vanguard Value ETF (VTV -0.09%). Just as the name suggests, this Vanguard fund holds familiar value names like JPMorgan, UnitedHealth, and Procter & Gamble. These stocks have been decent performers of late, but their gains have hardly kept up with those of growth stocks. However, as the macroeconomic environment shifts to a slower growth pace and rewards reliable cash flow, look for these tickers as well as this ETF to enter a period of pronounced outperformance.
Just bear in mind this is something of a philosophical trade that could take several quarters — if not several years — to demonstrate its worth.
Basic Materials
It’s not just higher interest rates that are making the environment more favorable to certain styles of stocks over others. The economic backdrop in place since the latter half of 2022 has also generated much concern that the U.S. was headed toward a recession. This would obviously have been a problem for all companies, but downturns present a particular challenge to basic materials businesses.
This is why The Materials Select Sector SPDR Fund (XLB 0.16%) has been such a laggard of late. However, given the ever-improving prospects that the country will stay on course for an economic soft landing — a landing which may well have already occurred — the recent weak patch for the materials sector may have created a prime buying opportunity for this particular SPDR fund.
That’s the word from brokerage firm Charles Schwab, anyway. Materials is one of only three sectors Schwab expects to outperform the broad market into the foreseeable future.
And it’s not just Schwab. Morningstar is also bullish on several of this sector’s bigger names. Mutual fund giant Fidelity and investment bank Morgan Stanley see the opportunity as well, with both citing an unexpected rekindling of economic growth as a key driver of any immediate gains. The stronger the economy, the greater the demand for materials — from copper to cement to lumber to chemicals — will be.
Energy
The oil and natural gas sector is another of Charles Schwab’s favorites now — and again, that brokerage is not alone in its bullishness. Fidelity, among others, is on board with the idea as well.
“We may be in the early innings of a significant investment cycle in international and offshore production, which has not yet been fully appreciated by investors,” Fidelity analyst Maurice FitzMaurice explains. “Energy equipment and services companies, which provide the essential equipment and services needed to produce oil and gas, could be potential beneficiaries of this investment cycle.”
In the meantime, crude oil prices are poised to hold up better than many onlookers have been anticipating. A recent Reuters poll forecasts that Brent crude prices are likely to end the year near $84 per barrel — close to where it’s trading now — thanks to demand that’s keeping up with supply. In this vein, Goldman Sachs forecasts that global consumption of crude oil will continue growing through 2034.
Given these circumstances, The Energy Select Sector SPDR Fund (XLE -1.56%) is a smart, easy way to add some energy exposure to your portfolio.
Artificial Intelligence
Last but not least, add the Global X Artificial Intelligence & Technology ETF (AIQ 0.85%) to your list of exchange-traded funds to buy in July.
The economic environment ahead may be one that broadly favors value names over growth stocks. There are always exceptions to such overarching themes, however. The advent of artificial intelligence is one of these exceptions. Precedence Research forecasts that the worldwide AI market will grow at an annualized pace of 19% through 2032.
There are no tightly focused artificial intelligence ETFs — not even this one (despite the name). However, this exchange-traded fund holds most all of the technology stocks with the most to gain from the growth of the AI industry. Nvidia, Microsoft, and Apple are some of its top holdings, and each brings something unique — and important — to the artificial intelligence movement.
There’s no better means of plugging into the AI revolution without becoming something of an expert on it and then taking risks on what are sure to remain volatile stocks.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Charles Schwab, Goldman Sachs Group, JPMorgan Chase, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Value ETF. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.