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Time for High Beta & Momentum ETFs as Trade Tensions Ease?
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Wall Street surged to a three-month high at the start of June with several indices hovering around record highs. Easing of trade tensions and a less-downbeat-than-feared global growth outlook have apparently boosted markets (read: Nasdaq at All-Time High: Play These 5 ETFs).
Trade Tensions Backtrack Slightly
Treasury Secretary Steven Mnuchin reportedly advised President Donald Trump to excuse Canada from metals tariffs at a meeting on Tuesday. And China has also reportedly made efforts to quell the trade war tensions by offering to buy around $70 billion of U.S. goods so that the United States can reduce its trade deficit.
While tensions persist with Mexico imposing tariffs worth around $3 billion imports from the United States and several other countries considering retaliatory measures for U.S. duties on steel and aluminum, the latest development signals of cooling in tensions.
World Bank Retails Global Growth Forecast
The World Bank estimates that the global economy will likely expand 3.1% this year, keeping the projection as it was in January. The growth rate was also same as that of 2017, which itself was the best year since 2011.
With recent signs of a slowdown in some developed economies including the Euro zone, many anticipated a more subdued global growth outlook for this year. But the reaffirmation of the World Bank outlook dispelled that fear to some extent.
U.S. Economy Looks Pretty Steady
The U.S. economy has been the strongest now since the last recession. The economy grew 2.2% in Q1 and recent estimates call for robust expansion (which is 3.7%) in Q2 after a moderate Q1. Meanwhile, the unemployment rate dived to an 18-year low and manufacturing activity grew at a decent clip despite the ongoing trade spat (read: 5 Hottest Small-Cap ETFs of 2018).
Needless to say, the broader market will cheer such positive developments. The three key indexes, namely the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite have added about 1.8%, 2.2%, and 2.6%, respectively, in the last five days (as of Jun 6, 2018).
In this regard, investors can join the new-found optimism in the market and play high beta and momentum ETFs as long as the trend is alive.
High Beta ETFs
Beta is directly related to market movement. Notably, high beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.
PowerShares S&P 500 High Beta Portfolio (SPHB - Free Report)
This fund tracks the performance of 100 stocks from the S&P 500 index with the highest realized volatility over the past 12 months. The fund charges 25 bps in fees.
High Momentum ETFs
Momentum investing might be an intriguing idea for those seeking higher returns in a short spell.
The Fidelity U.S. Momentum Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that “exhibit positive momentum signals.” It charges 29 bps in fees (read: Solid Data Fuels Trade of Momentum ETFs & Stocks).
This ETF seeks to track the performance of large and mid-cap U.S. stocks exhibiting relatively higher momentum characteristics. The fund charges 15 bps in fees (see all large-cap ETFs here).
Image: Bigstock
Time for High Beta & Momentum ETFs as Trade Tensions Ease?
Wall Street surged to a three-month high at the start of June with several indices hovering around record highs. Easing of trade tensions and a less-downbeat-than-feared global growth outlook have apparently boosted markets (read: Nasdaq at All-Time High: Play These 5 ETFs).
Trade Tensions Backtrack Slightly
Treasury Secretary Steven Mnuchin reportedly advised President Donald Trump to excuse Canada from metals tariffs at a meeting on Tuesday. And China has also reportedly made efforts to quell the trade war tensions by offering to buy around $70 billion of U.S. goods so that the United States can reduce its trade deficit.
While tensions persist with Mexico imposing tariffs worth around $3 billion imports from the United States and several other countries considering retaliatory measures for U.S. duties on steel and aluminum, the latest development signals of cooling in tensions.
World Bank Retails Global Growth Forecast
The World Bank estimates that the global economy will likely expand 3.1% this year, keeping the projection as it was in January. The growth rate was also same as that of 2017, which itself was the best year since 2011.
With recent signs of a slowdown in some developed economies including the Euro zone, many anticipated a more subdued global growth outlook for this year. But the reaffirmation of the World Bank outlook dispelled that fear to some extent.
U.S. Economy Looks Pretty Steady
The U.S. economy has been the strongest now since the last recession. The economy grew 2.2% in Q1 and recent estimates call for robust expansion (which is 3.7%) in Q2 after a moderate Q1. Meanwhile, the unemployment rate dived to an 18-year low and manufacturing activity grew at a decent clip despite the ongoing trade spat (read: 5 Hottest Small-Cap ETFs of 2018).
Needless to say, the broader market will cheer such positive developments. The three key indexes, namely the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite have added about 1.8%, 2.2%, and 2.6%, respectively, in the last five days (as of Jun 6, 2018).
In this regard, investors can join the new-found optimism in the market and play high beta and momentum ETFs as long as the trend is alive.
High Beta ETFs
Beta is directly related to market movement. Notably, high beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.
PowerShares S&P 500 High Beta Portfolio (SPHB - Free Report)
This fund tracks the performance of 100 stocks from the S&P 500 index with the highest realized volatility over the past 12 months. The fund charges 25 bps in fees.
High Momentum ETFs
Momentum investing might be an intriguing idea for those seeking higher returns in a short spell.
Fidelity Momentum Factor ETF (FDMO - Free Report) )
The Fidelity U.S. Momentum Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that “exhibit positive momentum signals.” It charges 29 bps in fees (read: Solid Data Fuels Trade of Momentum ETFs & Stocks).
iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report)
This ETF seeks to track the performance of large and mid-cap U.S. stocks exhibiting relatively higher momentum characteristics. The fund charges 15 bps in fees (see all large-cap ETFs here).
PowerShares DWA Momentum ETF (PDP - Free Report)
The fund looks to track the Dorsey Wright Technical Leaders Index. The fund charges 63 bps in fees.
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