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Uncertain About 2021 Santa Rally? 5 ETFs Appear Winning Bets
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A consensus carried out from 1950 to 2020 has revealed that December offered positive returns in 53 years and negative returns in 18 years, with an average return of 1.39%, one of the best seen in a year, as per moneychimp.com. It is believed that a Santa Clause rally normally drives the markets, this time of the year.
What Is Santa Rally?
Santa Claus rally refers to the jump in stock prices in the week between Christmas and New Year's Day. There are several factors behind this surge, including "tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week" as per investopedia.
In fact, some even believe that investors buy stocks during this period to cash in on another strong equity event, known as the January Effect, which takes place soon after. According to Stock Trader’s Almanac, there has normally been “a short, sweet, respectable rally within the last five days of the year and the first two in January.”
There has been an average 1.3% gain since 1950, and it has offered positive returns about 75% of the time since 1969, per a source. Since 1945, the S&P 500 rose nearly 1.5% in each December and gained in price 73% of the time, according to Sam Stovall at CFRA Research, as quoted on CNBC.
Will 2021 See a Santa Rally Despite Omicron Fear?
Charts suggest that the backdrop is warming up for a year-end rally in the S&P 500, CNBC’s Jim Cramer said Wednesday despite threats from the latest Omicron strain of COVID-19. As long as the VIX keeps falling, the S&P 500 appears to be up for a Santa rally, per Cramer.
CBOE Volatility Index (^VIX) has declined 15.4% past month versus 0.3% gains in the S&P 500. Considered Wall Street’s fear gauge, the VIX has been falling rapidly after spiking higher in late November and early December. Cramer even expects the S&P 500 to jump from around 4,700 to as high as 5,000.
Investors should note that the Omicron strain has so far been reportedly found out to be a milder variant than Delta. This may lead many countries not to impose severe lockdown rules. With President Biden not planning a lockdown right away, and governments and citizens seemingly more aware of handling new COVID infections by now, we do not see a massive threat to the global markets.
Holiday shopping is in full swing. The National Retail Federation (NRF) expects sales in November and December to increase as much as 11.5% year over year. This number is higher than NRF’s initial forecast of 8.5% to 10.5% growth.
While Thanksgiving, Black Friday and Cyber Monday have gone by, Super Saturday, often considered the second-busiest shopping day of the year, is yet to hit. So, more shopping is likely to be in the cards. All these facts and figures hint at yet another Santa rally this year and the following ETFs are likely to win.
The Zacks Rank #1 (Strong Buy) ETF puts 21% weight in Apparel. Apparel prices jumped 17.3% online in November. For the past eight months, Adobe data showed online prices for apparel have risen by over 9% year over year.
The fund tracks retailers that principally sell online or through other non-store channels. From Nov 1 to Nov 28, shoppers shelled out???$99.1 billion online, marking 13.6% growth from 2020, Adobe data showed, as quoted on footwearnews.com.
Notably, online prices for November rose 3.5% year over year, according to new data from Adobe on Thursday, representing the highest rise since 2014, quoted on Yahoo. The figure also represents the 18th successive month of year-over-year online inflation. The fund is heavy on Amazon and Alibaba.
The Zacks Rank #1 ETF puts 23.5% weight in Apple, followed by Microsoft (21.5%). Nvidia takes about 6.8% in the fund. Apple and Microsoft gadgets are sought-after gift items in the holiday season.
We may see a rise in bond yields in the coming days if the Fed plans to speed up QE tapering to contain inflation. If rates rise, value funds may take an upper hand over growth investing.
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
While the bet doesn’t have any direct link with holiday shopping, electric vehicle as a concept is piping hot now. The space is fully charged up with IPOs and government backing (read: EV Space is All Charged-Up With IPO News: ETFs to Play).
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Uncertain About 2021 Santa Rally? 5 ETFs Appear Winning Bets
A consensus carried out from 1950 to 2020 has revealed that December offered positive returns in 53 years and negative returns in 18 years, with an average return of 1.39%, one of the best seen in a year, as per moneychimp.com. It is believed that a Santa Clause rally normally drives the markets, this time of the year.
What Is Santa Rally?
Santa Claus rally refers to the jump in stock prices in the week between Christmas and New Year's Day. There are several factors behind this surge, including "tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week" as per investopedia.
In fact, some even believe that investors buy stocks during this period to cash in on another strong equity event, known as the January Effect, which takes place soon after. According to Stock Trader’s Almanac, there has normally been “a short, sweet, respectable rally within the last five days of the year and the first two in January.”
There has been an average 1.3% gain since 1950, and it has offered positive returns about 75% of the time since 1969, per a source. Since 1945, the S&P 500 rose nearly 1.5% in each December and gained in price 73% of the time, according to Sam Stovall at CFRA Research, as quoted on CNBC.
Will 2021 See a Santa Rally Despite Omicron Fear?
Charts suggest that the backdrop is warming up for a year-end rally in the S&P 500, CNBC’s Jim Cramer said Wednesday despite threats from the latest Omicron strain of COVID-19. As long as the VIX keeps falling, the S&P 500 appears to be up for a Santa rally, per Cramer.
CBOE Volatility Index (^VIX) has declined 15.4% past month versus 0.3% gains in the S&P 500. Considered Wall Street’s fear gauge, the VIX has been falling rapidly after spiking higher in late November and early December. Cramer even expects the S&P 500 to jump from around 4,700 to as high as 5,000.
Investors should note that the Omicron strain has so far been reportedly found out to be a milder variant than Delta. This may lead many countries not to impose severe lockdown rules. With President Biden not planning a lockdown right away, and governments and citizens seemingly more aware of handling new COVID infections by now, we do not see a massive threat to the global markets.
Holiday shopping is in full swing. The National Retail Federation (NRF) expects sales in November and December to increase as much as 11.5% year over year. This number is higher than NRF’s initial forecast of 8.5% to 10.5% growth.
While Thanksgiving, Black Friday and Cyber Monday have gone by, Super Saturday, often considered the second-busiest shopping day of the year, is yet to hit. So, more shopping is likely to be in the cards. All these facts and figures hint at yet another Santa rally this year and the following ETFs are likely to win.
ETFs in Focus
SPDR S&P Retail ETF (XRT - Free Report)
The Zacks Rank #1 (Strong Buy) ETF puts 21% weight in Apparel. Apparel prices jumped 17.3% online in November. For the past eight months, Adobe data showed online prices for apparel have risen by over 9% year over year.
ProShares Online Retail ETF (ONLN - Free Report)
The fund tracks retailers that principally sell online or through other non-store channels. From Nov 1 to Nov 28, shoppers shelled out???$99.1 billion online, marking 13.6% growth from 2020, Adobe data showed, as quoted on footwearnews.com.
Notably, online prices for November rose 3.5% year over year, according to new data from Adobe on Thursday, representing the highest rise since 2014, quoted on Yahoo. The figure also represents the 18th successive month of year-over-year online inflation. The fund is heavy on Amazon and Alibaba.
Technology Select Sector SPDR ETF (XLK - Free Report)
The Zacks Rank #1 ETF puts 23.5% weight in Apple, followed by Microsoft (21.5%). Nvidia takes about 6.8% in the fund. Apple and Microsoft gadgets are sought-after gift items in the holiday season.
SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)
We may see a rise in bond yields in the coming days if the Fed plans to speed up QE tapering to contain inflation. If rates rise, value funds may take an upper hand over growth investing.
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
While the bet doesn’t have any direct link with holiday shopping, electric vehicle as a concept is piping hot now. The space is fully charged up with IPOs and government backing (read: EV Space is All Charged-Up With IPO News: ETFs to Play).