Merry Christmas For Wall Street: Bet On These Momentum ETFs

The U.S.-China preliminary trade deal and the suspension of new rounds of U.S. tariffs on $156 billion of Chinese goods on Dec 15 sent stocks rallying before Christmas. A net 7% of stocks on the Nasdaq and NYSE hit new 52-week highs last week, the highest in six months. Sentiment Trader believes that such highs normally bode well for the market for the longer term, as quoted on CNBC.

CNBC data shows that for every stock slipping to a new low on the Nasdaq on Dec 16, nine set new highs. The NYSE recorded 241 new highs and 27 new lows, while the Nasdaq had 342 new highs and 62 new lows on Dec 16.The S&P 500, Dow and Nasdaq hit record highs on the day. Investors should note that, in stark contrast, about 40% of the stocks listed on the NYSE and Nasdaq slipped to new 52-week lows last December (read: A Look Back At S&P 500 Sector ETFs in 2019).

What’s Driving Wall Street Higher?

On Dec 15, U.S. Trade Representative Robert Lighthizer said the trade deal was "totally done" and expected almost double U.S. exports to China over the next two years.Plus, there were talks of a deal on USMCA. The House is expected to propose a vote this week, where it shouldn’t face any opposition.

Not only the phase-one trade deal, upbeat Chinese economic data bodes well for the market. Data showed that China's industrial output and retail sales growth picked up in November, allaying some global growth fears (read: Trade Deal Cut in Principle? Sector ETFs to Soar).

To add to the trade euphoria, solid Holiday season buying will work 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, the average the second best in a year at 1.35%, 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).

The benchmark S&P 500 has gained in nine of the past 10 weeks and went on to hit new highs on trade deal hopes, a decent third-quarter earnings season and a dovish Fed. Amid the return of risk-on trade sentiments, investors can consider the following ETF and stock options.

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.

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.

Invesco S&P MidCap Momentum ETF XMMO

The fund is composed of securities with strong growth characteristics selected from the Russell Midcap Index. It charges 39 bps in fees.

VictoryShares USAA MSCI USA Value Momentum ETF ULVM

The fund is designed to deliver exposure to equity securities of large and mid-capitalization U.S. issuers that have higher exposure to value and momentum factors, while also maintaining moderate turnover and lower realized volatility than traditional capitalization weighted indexes. It charges 20 bps in fees.

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.

SPDR Russell 1000 Momentum (NYSE:ONEO) Focus ETF (ONEO)

The fund reflects the performance of a segment of large-capitalization U.S. equity securities, demonstrating a combination of core factors with a focus factor comprising high-momentum characteristics. The fund charges 20 bps in fees.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>