Markets

Is This the Right Time to Buy Momentum ETFs?

The Sino-US trade tensions seem to be resolving. China’s Ministry of Commerce recently announced that both countries “agreed to properly resolve their core concerns and confirmed that the technical consultations on some of the texts were basically completed.” The announcement followed a conference call between U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and China’s Vice Premier Liu He. Moreover, President Donald Trump’s trade adviser Peter Navarro also told the Fox News that “we had excellent talks this morning. That will continue”.

Beijing also confirmed that major sections of the text for the Phase 1 deal with the United States have been “basically completed”. Per this  announcement, China agreed to implement the public health information systems for meat products and eliminate restrictions on poultry meat imports from the United States. Moreover, the countries reached a consensus on the regulatory system in the United States for purchasing squid products and cooked poultry from China (read: ETFs to Gain as Sino-US Trade Talks Progress).

The partial accord also includes Chinese concessions on agriculture, intellectual property and financial services. On the currency front too, the talks have been encouraging. In exchange for the United States considering the elimination of China’s name from the currency manipulators’ list, Beijing concurred to increase transparency in its currency policy.

Moreover, apart from the promising progress in the phase one trade deal, the Federal Reserve’ possible rate cut at Oct 29-30 meeting is also aiding the Wall Street. Notably, the S&P 500 recently hit an all-time high along with Nasdaq closing just below its record level.

Momentum ETFs in Focus

While the broader stock market is expected to gain traction from positive developments in trade talks, momentum investing will likely take centre stage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Here we presented five ETFs that could outperform on positive trade talk news. Further, these could beat broader market returns in the coming months if the optimism prevails.

iShares Edge MSCI USA Momentum Factor ETF MTUM

This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum Index. It charges 15 bps in fees per year and is a popular choice with AUM of $9.12 billion (read: ETFs to See Short-Term Rally on Signs of New Brexit Deal).

Invesco DWA Momentum ETF PDP

This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.55 billion in its asset base and charges 62 bps in annual fees (read: Momentum ETFs & Stocks in Focus as Trump Delays Tariff Hike).

Invesco S&P MidCap Momentum ETF XMMO

This ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms with the highest momentum scores. XMMO has AUM of $579.7 million and an expense ratio of 0.39%.

VictoryShares USAA MSCI USA Value Momentum ETF ULVM

This fund tracks the MSCI USA Select Value Momentum Blend Index, offering exposure to large and mid-cap companies with higher exposure to value and momentum factors while also maintaining a moderate turnover and lower realized volatility compared with the traditional capitalization weighted indices. It accumulated $486.6 million in AUM and charges 0.20% in expense ratio.

SPDR Russell 1000 Momentum Focus ETF ONEO

With AUM of $437.9 million, this product targets large-cap securities with a combination of core factors (high value, high quality and low size characteristics) and a focus factor comprising high momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index and charges an annual fee of 20 bps.

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Invesco DWA Momentum ETF (PDP): ETF Research Reports

iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports

SPDR Russell 1000 Momentum Focus ETF (ONEO): ETF Research Reports

Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports

VictoryShares USAA MSCI USA Value Momentum ETF (ULVM): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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