One significant theme of this market shift is the growing appetite for value investing. This strategy involves purchasing stocks or assets believed to be undervalued compared to their true worth. As investors look towards economic recovery and changes in government policy, stocks tied to the health insurance, energy, and financial sectors, as well as small-cap companies, are gaining traction. The potential for a higher deficit due to proposed tax cuts could also influence government borrowing and interest rates, further affecting market dynamics. Fed Chairman Jerome Powell’s comments hinting at potential rate cuts have strengthened beliefs that the Fed will act to support economic growth.
As rates are anticipated to fall, certain sectors such as utilities and real estate are expected to be the main beneficiaries because they tend to perform better when interest rates decrease. Low rates typically make mortgages cheaper, boosting activities in the housing market. Following this market shift, several exchange-traded funds (ETFs) have started to perform well. Notable among these are the iShares U.S. Real Estate ETF, which primarily focuses on real estate companies, and the iShares U.S. Home Construction ETF, which reaches out to firms involved in residential home manufacturing. Both funds and others highlighted in this rotation reflect an increasing interest among investors seeking exposure to sectors benefiting from the anticipated economic changes spurred by monetary policy adjustments.
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