Markets

Market Rally Returns: High-Beta & Momentum ETFs to Buy

After a subdued start, stocks finally gained momentum on trade relief. Anticipation of an initial-level trade deal by Dec 15 had been lifting Wall Street to record highs until President Trump’s comment that  “he could wait until after the 2020 election for a trade deal with China” sent shockwaves through the markets at the start of the month. U.S. support for Hong Kong protesters made matters worse (read: Not Santa, Trade Will Rule This December: ETFs to Your Rescue).

However, the latest developments indicated that the United States and China are going ahead to decide on “the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang,” according to people close to sources,, as quoted on Bloomberg.

U.S. negotiators now expect a phase-one deal with China to be signed before American tariffs are scheduled to be hiked on Dec 15. The agendas to be discussed would include “how to guarantee China’s purchases of U.S. agricultural goods and exactly which duties to roll back,” per the source.

Holiday Season Adds to Optimism

To add to the trade euphoria, solid Holiday season buying will go in favor of the markets.  A consensus carried out from 1950 through 2018 has revealed that December offered positive returns in 51 years and negative returns in 18 years, the average return being 1.35%, the second best seen in a year, as per moneychimp.com. It is believed that a Santa Clause rally normally drives markets, at this time of the year.

NRF expects retail sales in November and December to expand between 3.8% and 4.2%. Consumers are planning to spend $1,048, on average, which is 4% higher than last year (read: What Soft Confidence? 3 ETFs & Stocks for Solid Holiday Buying).

Per Adobe, online sales jumped 14.5% year over year to a record $4.2 billion on Thanksgiving.  Black Friday and Small Business Saturday also witnessed record figures of $7.4 billion, up 20% and $3.6 billion, up 18%, respectively. Notably, Thanksgiving sales surpassed $4 billion for the first time ever. Cyber Monday also broke another record by raking in $9.4 billion in online sales.

Amid the return of risk-on trade sentiments, investors can buy these below-mentioned ETFs and stocks.

Why High-Beta & Momentum Investing Is Intriguing Now

High Beta ETFs

Beta is directly related to market movement. Notably, high-beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high-beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.

Invesco S&P 500 High Beta Portfolio (SPHB

The underlying S&P 500 High Beta Index consists of 100 stocks from the S&P 500 Index with the highest sensitivity to market movements, or beta, over the past 12 months. The fund charges 25 bps in fees.

High Momentum ETFs

Momentum investing might be an intriguing idea for those seeking higher returns in a short spell. It looks to reflect profits from buying stocks that are sizzling on the market.

Fidelity Momentum Factor ETF (FDMO

The Fidelity U.S. Momentum Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that “exhibit positive momentum signals.” It charges 29 bps in fees.

iShares Edge MSCI USA Momentum Factor ETF (MTUM

This ETF seeks to track the performance of large and mid-cap U.S. stocks exhibiting relatively higher-momentum characteristics. The fund charges 15 bps in fees.

Invesco DWA Momentum ETF (PDP

The fund looks to track the Dorsey Wright Technical Leaders Index. It charges 62 bps in fees.

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Invesco DWA Momentum ETF (PDP): ETF Research Reports

Invesco S&P 500 High Beta ETF (SPHB): ETF Research Reports

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

Fidelity Momentum Factor ETF (FDMO): 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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