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The broader market kicked off 2023 on a moderate note. And why not? Traditionally, January brings with it seasonal tailwinds for the equity world. A consensus carried out from 1950 to 2022 shows that January ended up offering positive stock returns in 43 years and negative returns in 30 years, per moneychimp.com, with an average positive return of 0.85%.
Given this historical market performance, let’s take a look at the ETFs that can be intriguing bets for the month.
Small-Cap Value
Small-cap securities have historically proven their outperformance in January. The University of Michigan consumer sentiment for the United States was revised higher to 59.7 in December of 2022 from a preliminary of 59.1. The gauge for expectations was revised higher to 59.9 from 58.4 while the current conditions subindex was revised lower to 59.4 from 60.2. This ensures that the domestic economy is in decent shape.
And as small caps are more attached to the domestic economy, investors can find small-caps a good option to play. Investors can take a look at Royce Quant SmallCap Quality Value ETF (SQLV - Free Report) .
Materials
According to a 2005 academic paper, “manufacturing and production stocks (e.g., consumer durables, chemicals, construction, mining, steel) outperform between November 1st and April 30th”, quoted on investingdaily.com. Equity Clock also indicated that higher demand related to industrial production through the spring months feeds into seasonal strength in the material sector from Nov 20 through to May 5. This makes Materials Select Sector SPDR ETF (XLB - Free Report) our pick for January.
Platinum
Platinum surged to its best quarter since 2008, per CNBC. China has imported excessive amounts of platinum since 2019, according to the World Platinum Investment Council, quoted on CNBC. The Council anticipates a platinum deficit in 2023, with demand growing by 19% but supply increasing by just 2%. Abrdn Physical Platinum Shares ETF (PPLT - Free Report) is expected to continue its winning stretch.
Gold
Gold prices jumped to a six-month high and analysts expect records in 2023, per a CNBC article. The reason behind this is the likely decline in the greenback prices. As the Fed will likely slower the rate hike momentum due to the release of downbeat economic data points in early January, the U.S. dollar will lose strength and favor the non-yielding gold prices. Moreover, after a downbeat 2022, gold’s valuation is a little lower currently. This will offer the yellow metal a leeway to gain strength. Plus, the global growth slowdown should benefit the safe-haven asset, gold. SPDR Gold Shares (GLD - Free Report) should thus be watched for gains.
High-Yield ETF
After hitting multi-year highs, inflation rates started showing signs of cooling down from late 2022. Though rates are likely to decline in the coming days, interest rates are still hovering at a stubborn level. Then, the demand for higher current income should be in place as higher current income makes up for capital losses, if there is any. High Yield ETF seeks to generate a high current income with a secondary goal of capital appreciation. The fund yields 7.67% annually and its expense ratio is 1.29% annually.
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ETFs to Buy for January
The broader market kicked off 2023 on a moderate note. And why not? Traditionally, January brings with it seasonal tailwinds for the equity world. A consensus carried out from 1950 to 2022 shows that January ended up offering positive stock returns in 43 years and negative returns in 30 years, per moneychimp.com, with an average positive return of 0.85%.
Given this historical market performance, let’s take a look at the ETFs that can be intriguing bets for the month.
Small-Cap Value
Small-cap securities have historically proven their outperformance in January. The University of Michigan consumer sentiment for the United States was revised higher to 59.7 in December of 2022 from a preliminary of 59.1. The gauge for expectations was revised higher to 59.9 from 58.4 while the current conditions subindex was revised lower to 59.4 from 60.2. This ensures that the domestic economy is in decent shape.
And as small caps are more attached to the domestic economy, investors can find small-caps a good option to play. Investors can take a look at Royce Quant SmallCap Quality Value ETF (SQLV - Free Report) .
Materials
According to a 2005 academic paper, “manufacturing and production stocks (e.g., consumer durables, chemicals, construction, mining, steel) outperform between November 1st and April 30th”, quoted on investingdaily.com. Equity Clock also indicated that higher demand related to industrial production through the spring months feeds into seasonal strength in the material sector from Nov 20 through to May 5. This makes Materials Select Sector SPDR ETF (XLB - Free Report) our pick for January.
Platinum
Platinum surged to its best quarter since 2008, per CNBC. China has imported excessive amounts of platinum since 2019, according to the World Platinum Investment Council, quoted on CNBC. The Council anticipates a platinum deficit in 2023, with demand growing by 19% but supply increasing by just 2%. Abrdn Physical Platinum Shares ETF (PPLT - Free Report) is expected to continue its winning stretch.
Gold
Gold prices jumped to a six-month high and analysts expect records in 2023, per a CNBC article. The reason behind this is the likely decline in the greenback prices. As the Fed will likely slower the rate hike momentum due to the release of downbeat economic data points in early January, the U.S. dollar will lose strength and favor the non-yielding gold prices. Moreover, after a downbeat 2022, gold’s valuation is a little lower currently. This will offer the yellow metal a leeway to gain strength. Plus, the global growth slowdown should benefit the safe-haven asset, gold. SPDR Gold Shares (GLD - Free Report) should thus be watched for gains.
High-Yield ETF
After hitting multi-year highs, inflation rates started showing signs of cooling down from late 2022. Though rates are likely to decline in the coming days, interest rates are still hovering at a stubborn level. Then, the demand for higher current income should be in place as higher current income makes up for capital losses, if there is any. High Yield ETF seeks to generate a high current income with a secondary goal of capital appreciation. The fund yields 7.67% annually and its expense ratio is 1.29% annually.