ETF Edge

This is the best way to play a cyclicals comeback, ETF expert says

This is the best way to play a cyclicals comeback, experts say

Fears over the global economy are crushing stocks.

Cyclical, or economy-dependent sectors such as consumer discretionary and technology, have plummeted in August as investors flee to safe-haven assets such as gold and bonds.

Todd Rosenbluth, senior director of mutual fund research at CFRA Research, is betting on a reversal back to cyclical stocks.

"We at CFRA like this new ETF that came out from Direxion. It's a cyclical over defensive ETF, RWCD. It favors the cyclical side so the technology, the financials, the consumer discretionary — it's long that and it's short the defensive ones like utilities and consumer staples," Rosenbluth told CNBC's "ETF Edge" on Monday.

The RWCD cyclicals over defensives ETF has outperformed the rest of the market in the past six months, rallying 9% compared with a 5% gain on the S&P 500. However, in the past month as risk assets came under pressure, it has underperformed the market.

"We do think that the economic growth picture is going to improve, the earnings picture is going to be quite strong and this is a compelling way of exposure to that in one ETF as opposed to building it yourself," said Rosenbluth.

The ETF is 150 percent long cyclicals such as Microsoft, Apple and J.P. Morgan and 50 percent short defensives such as Exxon Mobil and Johnson & Johnson.

Other growth-focused ETFs do not look as promising to Tom Lydon, editor of ETF Trends. For example, the iShares self-driving ETF (IDRV), which has exposure to AlphabetTesla and other automakers developing that technology, does not deliver the goods, according to Lydon.

"You have to look under the hood and make sure that the bottom line of those companies affect the overall objective of the ETF and in this case, it's clearly not the case," Lydon told "ETF Edge."

The IDRV ETF, which launched in April, has been a laggard in the past three months — down more than 6% since mid-May while the broader market has been flat.