We are approaching the end of 2019, a year that is giving cues to becoming a historic one for the stock market. The key U.S. S&P 500 Index has rallied more than 28% this year, slightly behind 2013′s stellar gain of 29.6%.
If Santa rally grips Wall Street in the final days of December and the S&P 500 manages to notch up 29.6% gain in 2019, it could become the best year since 1997 when the benchmark jumped 31%.
President Donald Trump and his Chinese counterpart Xi Jinping’s joint efforts to make the phase-one trade deal click led to this superb upsurge in the fourth quarter. The S&P 500, in fact, recorded its longest winning streak since November. Stocks are heading for registering the best December and the fourth quarter in six years.
Rally to Remain Steady in 2020
The broader market rally should not show any signs of slowing, at least in early next year. Per BofA Global Research Fund Managers Survey, cash allocations dropped to 4.2% of portfolios, the lowest level since March 2013. BofA’s “Bull and Bear” reading spiked to its most bullish level since April 2018.
A net 29% of respondents surveyed anticipate growth improving in a year’s time, a considerable turnaround from a net minus-50% in June. Fears of trade tensions are receding and optimism for global growth is rising with a likely improvement in earnings growth. Low levels of interest rate are another tailwind. Growing risk-on-trade sentiments are pushing investors toward stocks and commodities away from bonds.
ETFs to Bet on
Industrial Select Sector SPDR Fund XLI
Alike many analysts, we also believe that stabilizing global trade and manufacturing as well as worldwide low rates should add stimulus to the industrial sector. The fund has a Zacks ETF Rank #1 (Strong Buy) (read: NAFTA Gone, USMCA In: ETFs in Focus).
Vanguard Financials ETF VFH
Most strategists are overweight in the financial sector as the largest portion of traditional value indexes is held by financial stocks. Steepening yield curve is the other positive. Investors should note that bank stocks are often known for hefty dividend payouts (read: 2 Sectors & Their ETFs Are Hot Picks for 2020).
John Hancock Multifactor Consumer Discretionary ETF (KL:JHMC)
Per a BMO strategist, “Consumer Discretionary, far and away, has the highest estimated long-term EPS growth expectations among the S&P 500 sectors.” Improving global economics backdrop and wage growth should energize the sector.
Vanguard FTSE Emerging Markets ETF VWO
Widespread policy easing in several emerging markets, a dovish Fed, commodity market strength, U.S.-China partial trade pact and the return of risk-on sentiments will perk up the emerging market stocks. According to Goldman, “Brazil, Mexico, Russia, South Africa and other nations still have room to loosen monetary policy, at least in the short term.” This makes the emerging market ETFs a basket of good bets.
Vanguard S&P 500 Growth Index Fund ETF Shares VOOG
Trades are betting big on growth stocks, which picked momentum this month and have performed better than the value stocks in the past month. Growth stocks look well-positioned heading into 2020 (read: A Spread of Growth ETFs at All-Time Highs).
iShares U.S. Technology ETF IYW
And last but not the least, technology stocks are in high demand. Maximum trades are taking place in this area, making this ETF a must-watch (read: A Look Back At S&P 500 Sector ETFs in 2019).
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iShares U.S. Technology ETF (IYW): ETF Research Reports
Industrial Select Sector SPDR Fund (XLI): ETF Research Reports
Vanguard Financials ETF (VFH): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
Vanguard S&P 500 Growth ETF (VOOG): ETF Research Reports
John Hancock Multifactor Consumer Discretionary ETF (JHMC): ETF Research Reports
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Zacks Investment Research