Three Besties: The Top ETFs to Watch in September

Our analyst's list proxy preferences for natural resources, tech and gold

• China appears ready to buffer the economy against further slowdowns.
• Natural resources, technology, and gold offer interesting options
• Performance in September depends on the Fed's rate hike path.

So, what are the three most important ETFs to track in September? Our proxy preferences for natural resources, tech and gold.

SPDR S&P Global Natural Resources ETF

The SPDR S&P Global Natural Resources ETF (GNR) is an exchange-traded fund (ETF) that exposes you to several natural resources sectors, including mining, metals, energy, and agriculture. While the ETF performed poorly in August, falling about 4%, several tailwinds are developing that may help to boost its performance in September.

One of the main factors that may help to lift GNR’s price in September is recent stimulus actions out of China. The People’s Bank of China (PBOC) and the central government of the People’s Republic of China (PRC) appear ready and willing to buffer the economy against further slowdowns.

This should help to alleviate China’s ailing economy, which is traditionally a commodity-hungry machine. Several companies that make up GNR’s top holdings should benefit from these moves, particularly BHP Group (BHP). The Australian miner produces coal, iron ore, and copper, among other products that China heavily sources.

While China’s property sector growth remains subdued, investors should focus on other tailwinds for BHP, which makes up around 4.6% of the GNR ETF. Coal should be in hot demand through September, like it has been in recent months, as China’s government continues to permit new coal power plant capacity. According to a report from the Centre for Research on Energy and Clean Air, China permitted 52 gigawatts of new coal power plant construction while also announcing 41 GW for new projects.

ARK Innovation ETF

A fund that focuses on disruptive innovation headed by Cathie Wood, the ARK Innovation ETF (ARKK) is coming off a disappointing August, sinking nearly 15% following several months of healthy gains. Is now the right time to buy this ETF for a turnaround in September?

A lot of that depends on overall market sentiment, with ARK’s holdings being comprised primarily of high-beta technology stocks. While that makes the fund vulnerable to shifts in risk sentiment, it also positions it to do well when the market rallies.

Currently, Tesla (TSLA), Roku Inc. (ROKU) and Zoom Video Communications (ZM) make up the fund’s top-three holdings at about 27%. These are stocks that have done well when the broader technology sector does well. These risk-on moves occurred when the market expects the Federal Reserve may stop hiking rates soon.

A series of weak economic data in late August caused rate traders to cut their bets on Fed hikes, which allowed the market to rally during the last week of August. If that trend continues, the ARK ETF looks poised to capture those gains. This may depend on some high-impact economic releases slated for early September, including the U.S. jobs report.

SPDR Gold Trust ETF

Gold prices struggled in August, but there are signs that the winds are shifting for the yellow metal. September may offer the perfect time to increase your portfolio’s exposure. The Fed and its rate hikes are once again a primary factor to consider here.

Treasury yields are likely near a cyclical high, with many seeing the Fed at or near the end of its current rate hiking cycle. U.S. economic data such as consumer confidence is waning, and job openings are decreasing. That signals to the Fed that the economy is softening, and it may not require more action besides sitting back and watching the economy slow.

If that were the case, we may see bond buyers move back into the market, which would help lower yields, thus helping the non-interest-bearing asset. In this scenario, the SPDR Gold Trust ETF (GLD) would be likely to perform well.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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