These 3 ETFs Could Shine as Interest Rates Fall

Core Viewpoint - The Federal Reserve's recent interest rate cut is expected to benefit dividend-paying stocks, making certain ETFs attractive investment options in a low-rate environment [2][3]. Group 1: Federal Reserve Actions - The Federal Reserve cut its benchmark short-term interest rate by 25 basis points due to slowing economic growth, particularly in the job market [2]. - The current economic forecast suggests one to two more rate cuts may occur in 2025 [2]. Group 2: Investment Opportunities - The market reacted positively to the Fed's rate cut, with specific ETFs focused on dividend-paying stocks likely to perform well as fixed-income investments yield lower returns [3]. Group 3: Schwab U.S. Dividend Equity ETF - The Schwab U.S. Dividend Equity ETF (SCHD) tracks the Dow Jones U.S. Dividend 100 Index and has a low expense ratio of 0.06% [5]. - As of June 30, the ETF's portfolio had the highest sector weight in energy (19.2%) and consumer staples (18.8%), with significant holdings in healthcare (15.5%) and industrial (12.5%) [6]. - The ETF offers a yield of 3.8%, compared to the S&P 500's 1.2% [7]. Group 4: Utilities Select SPDR Fund - The Utilities Select SPDR Fund (XLU) tracks the Utilities Sector Index, comprising 31 utility companies from the S&P 500 [9]. - The fund has defensive characteristics due to the essential nature of utility services and may benefit from growth in electricity demand for data centers [10]. - The fund has a yield of 2.8% and a low expense ratio of 0.08% [11]. Group 5: Vanguard High Dividend Yield ETF - The Vanguard High Dividend Yield ETF (VYM) aims to track the FTSE High Dividend Yield Index and has a low expense ratio of 0.06% [12]. - The ETF holds 579 stocks, with over 59% in financial, industrial, technology, healthcare, and consumer discretionary sectors, and the financial sector alone accounts for 21.7% [12]. - The largest holdings include Broadcom (6.7%) and JPMorgan Chase (4.1%), with a yield of 2.5% [13].