No matter what the underlying circumstances, exchange-traded funds typically represent a solid idea for investors, because they offer exposure to a basket of stocks rather than a specifically focused wager. But during volatile cycles such as now, the best ETFs to buy can help you survive the uncertainty in the equities market — and potentially thrive.
As mentioned earlier, ETFs promote exposure to several stocks. Therefore, if a few duds threaten to drag down your portfolio, you have other securities to help hold the line. Of course, the opposite is also true. If you have a few standout winners, you would have been better off just buying those names individually. Nevertheless, stock picking is tough business, which is why the best ETFs to buy are so popular.
To be clear, you can’t just pick any ETF and go on your merry way. If the fund is associated with a basket of losers, you’re going to drown in red ink. But as we navigate these treacherous waters, certain segments of the economy clearly look better than others.
Below are some of the best ETFs to buy in June.
United States Oil ETF
SPDR S&P Oil & Gas Exploration & Production ETF
SPDR S&P Insurance ETF
Health Care Select Sector SPDR Fund
iShares US Aerospace & Defense ETF
SPDR Gold Trust
AdvisorShares Vice ETF
United States Oil ETF (USO)
One of the easiest names to consider for best ETFs to buy, the United States Oil ETF (NYSEARCA:USO) has always been relevant due to our ravenous consumption of fossil fuels. However, the unique dynamics of the coronavirus pandemic, combined with global oil supply disruptions and the skyrocketing inflation rate have created a once-in-a-blue-moon catalyst for USO.
Indeed, USO is up nearly 63% year-to-date through the June 6 session. Over the trailing year, the fund is up over 87%. Trading in oil futures contracts, the USO ETF should have a bright future because of economic realities. Mainly, vehicle miles traveled have returned to pre-pandemic levels while fossil-fuel alternatives — such as switching to electric vehicles — are really out of the reach for most households, given that new EV transaction costs are now $60,000.
Whether we like it or not, high oil prices will probably be a long-term fixture until supply demand dynamics normalize. Let’s just say I’m not holding my breath.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
Following Russia’s unprovoked attack on Ukraine, European policymakers did what was natural: fast-track sustainable energy initiatives to help wean off Russian hydrocarbon dependency on the road to eventual energy independence. While this sentiment is completely understandable, it’s also aspirational. Building such infrastructure will take time and money. In the meantime, we can start fishing for what works.
That’s the cynical angle behind the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP). As as important as climate change and environmental justice are, sacrificing economic viability to achieve said gains is politically dangerous. Especially at this juncture, consumers want lower (or at least reasonable) energy prices.
To get there, increased oil and gas exploration investments could be key. Not only would this boost overall production, the infrastructure for hydrocarbons is already built out. Therefore, the XOP fund may qualify as one of the best ETFs to buy in June.
SPDR S&P Insurance ETF (KIE)
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After a pair of exciting ideas, let’s slow it down a bit with the SPDR S&P Insurance ETF (NYSEARCA:KIE). Let me get this out of the way: KIE is downright boring. Tied to its namesake insurance industry, this ETF is not going to get your blood racing.
However, boring is good when it comes to potential recessionary cycles. Moreover, the current economic backdrop may specifically favor KIE, and that’s because of the Federal Reserve. After expanding the money stock to an unprecedented level, the Fed now has the unenviable job of scaling back the froth without causing harm to the economy. At the very least, the central bank is committed to gradual increases in the benchmark interest rate.
That will likely help insurance stocks, which tend to share a linear relationship with interest rates: The higher the rate, the greater the growth. Thus, keep close tabs on KIE as one of the best ETFs to buy.
Health Care Select Sector SPDR Fund (XLV)
Although the broader healthcare sector is incredibly relevant, picking out individual stocks to buy can be difficult due to several variables contributing to the overall picture. That’s why the Health Care Select Sector SPDR Fund (NYSEARCA:XLV) is appealing, giving investors exposure to a basket of pharmaceutical, medical equipment and health insurance companies.
To be fair, the XLV ETF is not off to a great start this year, declining nearly 8% year-to-date. Some of the issues could stem from controversies affecting certain names within the XLV’s core holdings. Having said that, healthcare is a vital sector. Recent events may also help push this ETF back into the black.
For one thing, Covid-19 cases are still ongoing, possibly benefitting XLV-listed vaccine developers. Moreover, monkeypox cases have sprouted rather quickly and alarmingly, inspiring pharmaceuticals to cook up a solution. Since monkeypox produces revolting physical symptoms, people will be presumably predisposed to vaccinate against the virus.
iShares US Aerospace & Defense ETF (ITA)
Although there are no guarantees — even with the best ETFs to buy — the iShares US Aerospace & Defense ETF (BATS:ITA) in many ways sells itself. Obviously, with Russia’s invasion of Ukraine, the action disrupted the modern global order. With no end to the war in sight, defense contractors essentially have an organic marketing opportunity, to put it cynically.
On the other side of the world, President Joe Biden made a startling disclosure, providing clarity regarding on U.S. military policy toward Taiwan. Essentially, Biden stated that he would direct U.S. forces to protect the island territory from a Chinese assault, sending ripple effects throughout the globe. Obviously, China was none too impressed with the pivot from prior ambiguous policies, but it does provide fertile ground for ITA.
On a YTD basis, the ETF is up by a bit under 2%, no doubt bolstered by Biden’s arguably regrettable disclosure. Either way, look to ITA as one of the best ETFs to buy in June.
SPDR Gold Trust (GLD)
On surface level, the SPDR Gold Trust (NYSEARCA:GLD) would seem an ideal choice among the best ETFs to buy. First, you have multiple fear-trade catalysts, from warfare in Europe to infectious disease outbreaks to brewing global recession fears. Second, you have the ultimate booster for precious metals in the form of soaring inflation. Yet the GLD is up by less than 1% this year.
Still, for patient investors, GLD could be an intriguing idea. Since the May 13 session, the precious metals-focused fund has been gradually moving higher. Further, the fundamentals are very supportive of gold. According to data from the Bureau of Labor Statistics, the purchasing power of the dollar declined by 11.3% between April 2020 through April 2022, implying an inflationary catalyst for the GLD.
To be fair, the dollar has been more of a safe haven than precious metals, which is a distraction for this ETF. However, in combination with many other circumstances going awry, perhaps nothing might shine brighter than gold.
AdvisorShares Vice ETF (VICE)
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If you hate trading and profiting off cynical narratives, you might want to turn away. On the other hand, if you invest completely objectively and divorced from emotions, then the AdvisorShares Vice ETF (NYSEARCA:VICE) could be up your alley. With its core holdings geared toward casinos, alcohol, tobacco, fast food and adult entertainment, VICE caters to all the delightful activities of life.
However, the intensity of demand for “sinful” products and services could rise significantly during an economic downturn. Again, it’s terribly cynical to point this out but some data indicates that as the economy falters, imbibing increases. If so, it would logically suggest that other activities, such as smoking will rise as well.
Despite the tempting narrative for the VICE ETF, it must be said that it’s not a great performer, shedding more than 17% YTD. Therefore, if you decide to take a shot, only do so with money you can afford to lose.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.