The Federal Reserve Chair Jerome Powell’s gloomy speech last week in Jackson Hole, Wyoming, warned investors of the Central Bank’s utmost commitment to bring down inflation. Even after a total of 2.25 percentage points of rate hikes, Powell confirmed that this is “no place to stop or pause.” He admitted that the policies would bring “some pain.”
Economist Stephen Roach believes that a deeper downturn might be on the horizon after the first half’s negative economic growth. “We’re going to have a cumulative drop in the economy [GDP] somewhere of around 1.5% to 2%. And, the unemployment rate is going to have to go up by 1 to 2 percentage points in a minimum,” said Roach.
Experts have warned that there might be a long way to go before the tight monetary policy is reversed, which might induce greater market volatility.
Energy Select Sector SPDR Fund (XLE)
XLE seeks to provide before-expenses investment results that correspond with the price and yield performance of the Energy Select Sector Index companies. The fund offers exposure to the United States energy sector and can be used as a tactical overlay for investors looking for exposure.
As of August 29, the fund’s top holdings include Exxon Mobil Corporation (XOM) with a 22.83% weight, Chevron Corporation (CVX) with a 20.78% weight, ConocoPhillips (COP) with a 4.87% weight, Occidental Petroleum Corporation (OXY) with a 4.77% weight. It has a beta of 1.58. XLE has $39.06 billion in assets under management. Its expense ratio of 0.10% is significantly lower than the category average of 0.46%
Its NAV stands at $84.10 as of August 29. Its annual dividend rate of $2.16 yields 3.75% on current prices. Its dividend payouts have increased at a 9.5% CAGR over the past three years and a 10.8% CAGR over the past five years. The fund has a four-year average yield of 5.49%.
The ETF has increased 70.5% over the past year and 51.5% year-to-date to close its last trading session at $84.09. Its fund flows came in at $50.18 million over the past year and $350.98 million over the past month.
XLE’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SPDR S&P Dividend ETF (SDY)
SDY is linked to the S&P High Yield Dividend Aristocrats Index, which offers exposure to dividend-paying large-cap companies that exhibit value characteristics in the U.S. equity market. SDY invests in companies that are likely to continue paying dividends.
As of August 29, the fund has a NAV of $125.94. Its total expense ratio of 0.35% is substantially lower than the category average of 0.50%. It has $22.25 billion in assets under management. The fund’s annual dividend of $3.41 yields 2.70% on current prices. Its dividend payouts have increased at an…
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