Four ETFs for an Uncertain Future

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Includes: PJP, VDC, XLP, XPH
by: Tom Lydon

ETF safe havenAfter some decent rallies in the markets and exchange traded funds investors have regained a fraction of their former wealth. But investors are still gripped with uncertainty and safe haven investments still have appeal.

Health care and consumer staples are traditionally safe haven sectors in uncertain times, according to the Motley Fool for The Money Times. The two sectors did relatively well during the bear market, but you should know the differences that helped them tough it out.

Consumer Staples. ETFs like Consumer Staples Select Sector SPDR (NYSEArca: XLP) and Vanguard Consumer Staples ETF (NYSEArca: VDC) include consumer products companies like food and drug retailing, beverages, food products, tobacco, household products and personal products. The two funds both hold large-cap U.S. brands such as Philip Morris International (NYSE: PM), PepsiCo (NYSE: PEP), and Kraft Foods (NYSE: KFT) among their top holdings.

  • Vanguard Consumer Staples (NYSEArca: VDC): up 18% year-to-date

  • Consumer Staples Sector SPDR (NYSEArca: XLP): up 14.5% year-to-date

Health Care. Sector ETFs like PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP) and SPDR S&P Pharmaceuticals (NYSEArca: XPH) track pharmaceutical companies, with top names including Amgen (NASDAQ: AMGN) and Johnson & Johnson (NYSE: JNJ), along with mid-caps like Perrigo (NASDAQ: PRGO) and Valeant Pharmaceuticals (NYSE: VRX). [The case for health care investing.]

  • PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 18.1% year-to-date

ETF PJP

  • SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 27.9% year-to-date

ETF XPH

If consumers cut back on consumer goods, companies will still make a profit on basic necessities that people won’t cut back on, even in recessionary periods. Additionally, people won’t forgo medical care, since many medical products are not optional. The medical industry maintains high profit margins, which are helped by patent protections. However, laws and regulation have impeded new drugs from coming out, and the health-care legislation may hamper the industry.

For more information on the two sectors, visit our consumer staples category and health care category.

Max Chen contributed to this article.

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