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Here's Why the Time is Ripe to Tap Quality ETFs

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Wall Street is on a steady mode courtesy of the vaccine rally. A divided Congress and hopes of stimulus supported the rally in recent weeks, pushing the key indexes to all-time highs.

Investors probably started considering the possibilities of a V-Shaped or U-shaped economic recovery. The rise in future OPEC oil output in a more gradual-than-expected manner, has also aided the stock market rally.

But how long will the vaccine rally last?

Pfizer COVID-19 vaccines may not be widely available in the United States until late June or July, as the company is busy meeting overseas orders. This means that the U.S. government may not be able to spread vaccination as fast as it had expected. And this is happening amid fast rising virus cases in the United States.

Though some market pundits believe that the worst is over, some are still doubtful about the longevity of the market recovery. Investor Peter Boockvar cautions bullishness is at dangerous levels, as quoted on CNBC.

“Sentiment has gotten as ebullient as we’ve seen in early 2000 [dot-com bubble euphoria],” the Bleakley Advisory Group chief investment officer told CNBC’s “Trading Nation” on Dec 9. According to Boockvar, central banks’ easy-money policies designed to safeguard the pandemic-inflicted economy may also lead to inflationary threat next year.

Thus, we believe rates could rise next year, causing some sector rotation. Then again, the corporate activities, be it merger and acquisition or IPOs, are going on at full swing. Stimulus hopes in the United States are also strengthening. Vaccination will be starting in the several countries gradually.  

Thus, what can really safeguard you in this situation is investing in some good-quality ETFs that have performed well in the peak of pandemic having returned decent year-to-date gains and have the strength to outperform in a post-pandemic economy.

ETFs in Focus

Pacer US Export Leaders ETF (PEXL - Free Report)

The fund follows an objective rules-based methodology that uses a quality and a value screen to select top companies in the index universe. The index picks the top 100 companies with the highest foreign sales as a percentage of total sales and highest change in free cash flow growth over the past five years. The fund is up 21.5% this year and has added 5.9% past month.

WisdomTree International Quality Dividend Growth Fund (IQDG - Free Report)

The fund has access to the investment landscape of the developed international world, ex-U.S. and Canada dividend growing companies by applying quality and growth screens. The fund is up 13.1% this year and has gained 3.7% past month.

Invesco S&P SmallCap Quality ETF (XSHQ - Free Report)

Focusing on quality quotient is important even for the small-cap investing.  The fund is based on the S&P SmallCap 600 Quality Index. The index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated on the average of three fundamental measures: return on equity, accruals ratio and financial leverage ratio.

FlexShares US Quality Large Cap Index Fund (QLC - Free Report)

For investors seeking to tap the U.S. large-cap exposure with the quality, value and momentum factors may bet on the fund. The fund tracks the Northern Trust Quality Large Cap Index. It is up 10.6% this year and has gained 3.4% past month.

JPMorgan U.S. Quality Factor ETF (JQUA - Free Report)

The fund provides equity exposure with a portfolio comprising the highest quality U.S. stocks in each sector. The fund invests in high-quality stocks, as defined by profitability, financial risk and earnings quality that aim to outperform over time. The fund has added 14.3% this year and 3.1% past month.  

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