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Santa Rally Set In? 4 Best ETF Areas to Tap the Likely Rebound
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Santa seems to have arrived at Wall Street as the key equity indexes jumped on Dec 21 after three loss-making days amid fears about the fast-spreading Covid-19 Omicron variant. According to the Stock Trader’s Almanac , Santa Rally (a trend discovered in 1972) takes place over the last five trading days of December and the first two sessions of January.
Wall Street is edgy this year due to Omicron concerns, leading many to doubt the arrival of Salta Clause at Wall Street this year. PNC Financial believes that “we’ve already gotten the Santa rally.” The rally won’t rekindle due to Omicron risks and profit-taking, as quoted on CNBC.
But CNBC’s Jim Cramer said lately that he believes there will be a Santa Claus rally this year despite the strong Omicron variant that’s spiking Covid cases during the holidays. Cramer tweeted early Tuesday: “Historically today is the day the Santa Claus rally starts. It worked even during 2007-2009. So, it is hard to doubt,” per a CNBC article. However, the Santa Claus rally failed to live up to investors’ expectation several times including in 1990, 1999, 2004, 2007, and 2014, per Business Insider.
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. If we dig a little deeper, the consistency of this rally would be more visible.
Is There Any Chance of 2021 Seeing a Super-Strong Santa Rally?
With just a handful of days remaining for Christmas and sentiments still wavering, it looks like such a stupendous surge is less likely this year. Still, a tepid rally is possible thanks to decent jobs market and upbeat corporate earnings. Hence, investors need to be mindful while betting big on this winning Santa trend. We have highlighted a few ETF picks.
Real Estate
The ETFs on the U.S. real estate sector have been surging lately on still-low rates. The fast-spreading new COVID-19 variant Omicron and the Fed’s hawkish signal led to a rise in safe-haven demand. Plus, rising inflation is great for real estate investing. Apartment rent and occupancy hit record highs, even as market entered its traditionally sluggish season.
Real Estate Select Sector SPDR ETF (XLRE - Free Report) – The Real Estate Select Sector Index includes securities of companies from the following industries real estate management and development and REITs, excluding mortgage REITs. XLRE yields 3.69% annually (read: Warm Up Your Portfolio With These ETFs This Winter).
Cash Cows
When analyzing a business, it is often said that ‘cash is king.’ Hence, some investors like to focus on companies that generate excess cash flows. These kinds of companies have plenty of leeway to cover themselves from uncertainties.
Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) – The Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to top 100 small-cap U.S. companies with the highest free cash flow yield. Small-caps are also good bets to tap the January Effect.
Low-Volatility High-Dividend
Omicron fear and uneven global growth momentum might keep the high-risk securities on the edge this year. This would keep bond yields at lower levels for long. No wonder, such a low treasury yield would spur investors to rush to dividend destinations. Hence, dividends along with the low-volatility volatility trait is winning bet right now.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) – The underlying S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that have historically provided high dividend yields and low volatility. The ETF yields 3.90% annually.
Low P/E Momentum ETFs
We suggest tipping toes into the momentum ETFs with a relatively low P/E. Momentum investing is an intriguing idea for those seeking higher returns in a short spell. Momentum investing looks to reflect profits from buying stocks which are sizzling on the market.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – The underlying S&P 600 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell 2000 Index. XSVM has a P/E of 11.59X versus S&P 500’s P/E of 21.70X.
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Santa Rally Set In? 4 Best ETF Areas to Tap the Likely Rebound
Santa seems to have arrived at Wall Street as the key equity indexes jumped on Dec 21 after three loss-making days amid fears about the fast-spreading Covid-19 Omicron variant. According to the Stock Trader’s Almanac , Santa Rally (a trend discovered in 1972) takes place over the last five trading days of December and the first two sessions of January.
Wall Street is edgy this year due to Omicron concerns, leading many to doubt the arrival of Salta Clause at Wall Street this year. PNC Financial believes that “we’ve already gotten the Santa rally.” The rally won’t rekindle due to Omicron risks and profit-taking, as quoted on CNBC.
But CNBC’s Jim Cramer said lately that he believes there will be a Santa Claus rally this year despite the strong Omicron variant that’s spiking Covid cases during the holidays. Cramer tweeted early Tuesday: “Historically today is the day the Santa Claus rally starts. It worked even during 2007-2009. So, it is hard to doubt,” per a CNBC article. However, the Santa Claus rally failed to live up to investors’ expectation several times including in 1990, 1999, 2004, 2007, and 2014, per Business Insider.
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. If we dig a little deeper, the consistency of this rally would be more visible.
Is There Any Chance of 2021 Seeing a Super-Strong Santa Rally?
With just a handful of days remaining for Christmas and sentiments still wavering, it looks like such a stupendous surge is less likely this year. Still, a tepid rally is possible thanks to decent jobs market and upbeat corporate earnings. Hence, investors need to be mindful while betting big on this winning Santa trend. We have highlighted a few ETF picks.
Real Estate
The ETFs on the U.S. real estate sector have been surging lately on still-low rates. The fast-spreading new COVID-19 variant Omicron and the Fed’s hawkish signal led to a rise in safe-haven demand. Plus, rising inflation is great for real estate investing. Apartment rent and occupancy hit record highs, even as market entered its traditionally sluggish season.
Real Estate Select Sector SPDR ETF (XLRE - Free Report) – The Real Estate Select Sector Index includes securities of companies from the following industries real estate management and development and REITs, excluding mortgage REITs. XLRE yields 3.69% annually (read: Warm Up Your Portfolio With These ETFs This Winter).
Cash Cows
When analyzing a business, it is often said that ‘cash is king.’ Hence, some investors like to focus on companies that generate excess cash flows. These kinds of companies have plenty of leeway to cover themselves from uncertainties.
Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) – The Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to top 100 small-cap U.S. companies with the highest free cash flow yield. Small-caps are also good bets to tap the January Effect.
Low-Volatility High-Dividend
Omicron fear and uneven global growth momentum might keep the high-risk securities on the edge this year. This would keep bond yields at lower levels for long. No wonder, such a low treasury yield would spur investors to rush to dividend destinations. Hence, dividends along with the low-volatility volatility trait is winning bet right now.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) – The underlying S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that have historically provided high dividend yields and low volatility. The ETF yields 3.90% annually.
Low P/E Momentum ETFs
We suggest tipping toes into the momentum ETFs with a relatively low P/E. Momentum investing is an intriguing idea for those seeking higher returns in a short spell. Momentum investing looks to reflect profits from buying stocks which are sizzling on the market.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – The underlying S&P 600 High Momentum Value Index is composed of securities with strong value characteristics selected from the Russell 2000 Index. XSVM has a P/E of 11.59X versus S&P 500’s P/E of 21.70X.