Future of Work

ETF Strategies To Follow In 2023 According To An Expert

ETF exchange-traded funds

Global markets have been zig-zagging over the last year, as the greater half of 2022 saw macroeconomic problems causing headwinds for investors and traders. On the back of these challenges, global central banks have been aggressively hiking rates in an attempt to dampen red-hot inflation, causing near and long-term concern across the board.

With the year in full swing and ongoing talks of a possible recession, many experts are hawkish regarding the coming months of trading. Against the backdrop of slower consumer spending, and ongoing job layoffs, markets have been teetering in all sorts of directions, with investors struggling to outpace economic upheaval.

The odds are stacked against investors and traders, and those who are not ready for any sudden economic downturn could see their wealth deplete as the months drag on, said Marc Despallieres of Vantage Markets, a multi-asset brokerage platform that operates in 172 countries globally. “There may be more traders looking at safer investment tools to ride out the volatile markets.”

At the start of February this year, the Federal Reserve is set to raise its benchmark rate by another half a percentage point. In December 2022, the benchmark range of 4.25% to 4.5% was the highest recorded level in 15 years, and some forecast that the Feds will continue its monetary policy – even as inflation cools down – ending 2023 at a range of 5.1%.

The looming dark clouds of economic uncertainty would result in many more investors, traders, and rookies resorting to the stock market as they look to hedge possible stagflation. In an attempt to keep your portfolio growing and diversified, here are some ETF strategies, according to Schaecter, that investors can follow this year.

Consider consumer staples

While consumers have had a hard time keeping up with rising prices and the cost of living spiraling out of control, this sector has seen some significant moments despite the challenges. Schaecter says that this sector has growth potential in the year, and some interesting stock picks deliver decent dividend yields.

While it may be hard to source out these inflation-beating dividend stocks, it’s certain that whether inflation keeps rising or stagflation occurs, consumers will continue to spend their dollars on necessities such as food and other consumables.

Try senior loans ETFs

“These instruments have remained under the radar for quite some time but could gain more traction when interest rates continue to climb, much of what we’ve seen over the last year,” says Despallieres.

Ongoing interest rate hikes could provide a boost to these investments, with potential market opportunities for investors. Some top picks for this year include SPDR Blackstone Senior Loan ETF (SRLN), Invesco Senior Loan ETF (BKLN), and First Trust Senior Loan Fund (FTSL), among others. These ETFs have a year-to-date price change of 3.26%, 2.59%, and 3.83%, respectively.

Seeking ongoing growing opportunities

When the markets are flat and investors are hawkish, new opportunities can be hard to come by. Finding sectors that will present themselves and investors with more fruitful innovation against economic downturn could make it difficult for investors to accurately predict where they should park their cash.

A sector that could see new opportunities in the year is healthcare. The healthcare sector remains an indispensable choice, regardless of economic conditions and challenges. Whether markets are up or down, or if a recession unravels, the medical industry will constantly remain in demand and seek new ways to outgrow current difficulties.

Look for international ETFs

In the coming months, we could see more investors looking to diversify their portfolios with international ETFs, as markets back home struggle to pull themselves out of the mud.

Some overseas ETFs such as iShares MSCI Chile (ECH), iShares MSCI Brazil (EWZ) and

iShares MSCI Turkey (TUR) all gained tremendously at the close of last year. Respectively, these ETFs surged by 106%, 25%, and 12%.

“Geopolitical tension and ongoing COVID-related restrictions might make it difficult to see the value in overseas ETFs,” says Despallieres. He goes on to say, “yet if you consider how countries have been managing the reopening of their economies, and countries constantly looking for more affordable alternatives in transportation and logistics, these factors could have a long-term effect on domestic conditions.”

Final thoughts

With so much to consider for the months ahead, it becomes increasingly challenging to determine what the outcomes of every strategy can present for investors. Sticking to what you know, and playing it safe, with smaller risks could provide some growth, but you would need perfect timing to enter.

“It’s imperative that investors, both novice and seasoned professionals establish a robust and time-tested strategy and not try to time the market because you can never really predict the market accurately every single time,” says Despallieres.

Written by Jacob Wolinsky
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Jacob Wolinsky
Jacob Wolinsky is the the founder and CEO of ValueWalk LLC. What started as a hobby 10 years ago, has turned into a well-known financial media empire with millions of monthly visitors focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, I worked as an equity analyst first at a micro-cap focused private equity firm, as well as an analyst at a small/mid-cap value-focused research shop. After that, I worked in business development for hedge funds. I live with my wife and four kids in Passaic New Jersey.

Full Disclosure: I only invest in broad-based ETFs and mutual funds. I no longer purchase equities to avoid even the appearance of a conflict of interest.

Jacob Wolinsky is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn.