New Buy Ratings On Industrials And Automakers

David Dierking

Good morning! Here's the ETF Focus Daily for Tuesday, May 19, 2020.

What To Watch

Walmart and Home Depot reported solid Q1 results despite the coronavirus-related economic shutdown. This doesn't necessarily mean that the economy is healthy, but more that it's the online retailers and basic home necessities businesses that will do best in this environment. Retail is still in trouble, but there are indeed pockets of strength.

Watch for Jerome Powell's and Steve Mnuchin's testimony in front of Congress. I don't think we'll hear anything that we haven't already. Powell will likely reiterate that the Fed is prepared to do whatever is necessary, while Mnuchin tries to ensure the public that the economy will recover. A mention of another round of stimulus could perk up stocks today.

3 ETF Trade Ideas For The Week Ahead

Industrials Select Sector SPDR ETF (XLI)

The industrial sector has been a steady laggard in 2020, trailing the S&P 500 by 13%, but sentiment could soon change.

With manufacturing slowly coming back online, including 51 auto plants, the industrial sector could be finally ready to bottom.

Backward-looking numbers will be bad, but I'd lean towards being overweight industrials here.

Pacer Benchmark Retail Real Estate Sector ETF (RTL)

REITs, especially those focused on retail, have been getting hammered lately, but I think they're now worth another look.

While shopping centers are largely being shunned by investors, the recent retail bankruptcies could be shaking out some excess.

RTL is small and thinly-traded, so use caution when buying or selling.

First Trust NASDAQ Global Auto Index ETF (CARZ)

Auto production facilities are finally coming back online and now could be an attractive time to buy low on the sector.

Like airlines, sentiment for the automakers is about as low as it's going to get, making the sector an interesting value play.

Automakers could resume near-normal production levels again by the end of the year.

Trending Higher

  1. Marijuana
  2. Gold Miners
  3. MLPs

Trending Lower

  1. Real Estate
  2. Cybersecurity
  3. Cloud Computing

Quick Thoughts

Yesterday's rally was a strong follow-up to last week's bull market finish. Utilities outperformed the S&P 500, so it's not a full-on bull confirmation, but traders are enthusiastic. Right now, investors are pricing in a strong recovery and some caution should be warranted here.

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