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The year 2016 unfolded amid a myriad of woes and huge uncertainty. The woes stemmed mainly from the developed foreign economies due to growth issues and uncertainties in the homeland emanating from the speculation over the speed and quantum of the Fed rate hike throughout 2016. The Fed enacted a meager hike at the tail end of 2015 and as of now, the investing world is expecting four more hikes in 2016, if everything goes well. However, things could change any point of time along with global or domestic market occurrences (read: ETF Tactics for a Rate-Proof Portfolio ). The broader global indices were mostly in red in 2015 snapping the bull market trend seen in earlier years. Now, all eyes will be on how the year 2016 fares on the bourses. Let’s not move too further ahead and instead focus on the prospective ETF winners of the first quarter of 2016. To do this, we have relied on both seasonality of the asset class and the earnings performance of the equity sectors. iShares U.S. Financials ETF (NYSEARCA: IYF ) The operating environment for financial companies is presently benign thanks to the Fed liftoff. In a rising rate environment, financial companies’ net interest margin should also rise. In any case, U.S. banks are in a better shape right now (read: Guide to the 7 Most Popular Financial ETFs ). Finance is expected to be a growth driver in the fourth-quarter 2015 earnings season which is already underway. The sector is expected to score the second-best earnings growth of 6.8%. Finally, as per Equity Clock, the financial sector, especially the banks, enjoy seasonality in the first quarter of every year. iShares Transportation Average ETF (NYSEARCA: IYT ) Equity Clock also reveals that the first quarter is beneficial for airlines and railroads with seasonality kicking in from the end of January and extending till early May. Plus, stepped-up economic activities and cheap fuel are still there to drive up transportation stocks. The transportation sector is expected to report 12.1% growth in earnings on just a 1% decline in revenues. One way to play this trend is with IYT. The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of close to 25 securities. Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) Gas utilities are normally in demand in the cold-stricken first quarter. Though utilities are likely to be on the downside following the Fed liftoff, but no material hike in the long-term interest rates since then made the sector a winner last one month compared with several glamorous and in-vogue sector ETFs like the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) and the Technology Select Sector SPDR ETF (NYSEARCA: XLK ) . The fund added 0.3% in the last one month (as of December 31, 2015) while XLY and XLK were down over 4.2% and 3.4%, respectively, during the same timeframe. Market Vectors Retail ETF (NYSEARCA: RTH ) According to Equity Clock , seasonal strength for the consumer discretionary sector stretches from October 17 to April 12. The sector is expected to post earnings growth of 2.4% in Q4, much better than the consumer discretionary sector’s expected earnings decline of 4.8%. Its sales expectation is also steady at 6.4% for Q4, again better than 1.4% growth expected from the consumer discretionary space. More jobs and cheaper fuel should help these sectors to grow. PowerShares DB USD Bull ETF (NYSEARCA: UUP ) The greenback is yet another asset which enjoys the tailwind of seasonality in the first quarter, per analysts. In any case, this U.S. dollar ETF lost over 1.2% in the last one month (as of December 31, 2015) giving the product a leeway for rally. The key logic behind the ascent as per Investopedia is that investors must have repatriated money at the yearend, resulting in a weaker dollar and then again bet on the dollar in the New Year. Also, in 2016, the U.S. dollar should have one more reason – U.S. policy tightening – to celebrate. iShares Russell 2000 ETF (NYSEARCA: IWM ) Small-cap stocks are the barometer of domestic economic health. So, when the U.S. economy shifted gear in December and experienced policy normalization, most eyes moved to small-cap stocks in order to cash in on the U.S. economic growth momentum. Plus, Russell 2000 has a history of rallying in January and February, as per Equity Clock. In any case, if dollar gains strength, investors will definitely bet on small-cap stocks as larger caps are more vulnerable to the dollar strength. Link to the original article on Zacks.com Scalper1 News
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