Momentum Stocks & ETFs To Buy Now?

Finally, global equities soared on September 15, welcoming weaker-than-expected U.S. retail sales data with a loud cheer as it reduced chances of a sooner-than-expected rate hike in the September 20-21 Fed meeting. Investors should note that the retail sales decline in the month of August followed a whirlpool of soft data in the areas of manufacturing, service and job growth (read: August Job Data Muddles Fed Rate Hike Chance: ETFs to Buy).

Retail sales in the U.S. dropped 0.3% sequentially in August, following an upwardly revised 0.1% increase in the prior period. The sales decline was wider than analysts’ expectation of a 0.1% fall. It was the first fall in retail sales since March this year. On a year-over-year basis, sales growth slackened to 1.9% from 2.4% in July. Investors should also note that U.S. manufacturing also shrank in August for the first time since February.

With this, chances of a September rate hike declined to 12% from 15% on September 15, 2016, as per the CME Group’s FedWatch tool. The possibility of a hike in the fourth quarter, however, was about 76%, per the source, though there are several hurdles on the way — especially the outcome of presidential election.

Plus, if oil prices keep sliding in tune with the IEA’s recent forecast of supply glut ahead, inflationary backdrop will continue to be muted, posing threats to the Fed’s policy tightening decision. As far as economic readings are concerned, the U.S. economy started losing momentum from August (read: ETFs to Watch as IEA Forecasts Weaker Global Oil Demand).

Already, Barclays (LON:BARC) Research tapered its projection for U.S. economic growth for Q3 to an annual rate of 2.6% from 2.8% predicted previously. Notably, the economy expanded at a weaker-than-expected annualized pace of 1.1% in Q2.

All three key U.S. indices were in the green with the big three funds, SPY (NYSE:SPY), DIA and QQQ adding 1%, over 1% and about 1.6%, respectively on September 15, 2016. Vanguard FTSE Europe ETF (VGK) added over 0.8%, all-world ETF iShares MSCI ACWI (ACWI) expanded about 1.1% and iShares MSCI Emerging Markets (EEM) soared over 1.7% on September 15 on a few more days of cheap dollar inflows (read: 5 Reasons Why Emerging Market ETFs Are Still a Buy).

How About Momentum Plays?

As more and more subdued economic data flow in, higher will be chances of the Fed not hiking rates and equity markets will also join in the low-rate euphoria. Thus, momentum investing might be an intriguing idea for those seeking higher returns in a short spell. Momentum investing looks to reflect profits from buying stocks that are sizzling on the market (read: Market Rebounds: Time for Momentum ETFs & Stocks?).

Below we highlight three momentum stocks and ETFs which may find a place in investors’ wish list.

iShares Edge MSCI International Momentum Factor IMTM– Up 1.1% on September 15

SPDR Russell 1000 Momentum ETF ONEO – Up 0.96% on September 15

iShares MSCI USA Momentum Factor ETF MTUM– Up 0.94% on September 15

Stock Picks

We picked three stocks on the basis of a Momentum Style Score of ‘A’ and a Zacks Rank #1 (Strong Buy). Our chosen stocks are:

Francesca's Holdings Corporation (NASDAQ:FRAN) – Up 2.58% on September 15

It is a specialty retailer of women's apparel products. The stock has a VGM score of ‘A’, though its Zacks Industry Rank is in the bottom 35%, at the time of writing.

Itron Inc. (NASDAQ:ITRI) – Up 1.80% on September 15

The company provides integrated system solutions for collecting and managing information about energy and water usage. The stock has a VGM score of ‘B’ and has a solid Zacks Industry Rank in the top 29%.

Silicon Motion Technology Corp. (NASDAQ:SIMO) – Up 0.97% on September 15

The company develops and markets low-power semiconductor solutions for the multimedia consumer electronics market. The stock has a VGM score of ‘B’ and has a solid Zacks Industry Rank in the top 8%.

Want more information on the world of ETFs? Make sure to check out the podcast below where we discuss the investing landscape with Kevin O’Leary and Connor O’Brien of O’Shares Investments:

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