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5 ETF Suggestions for Festive December

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The rituals of Santa Clause appear to be real for the broader market this year, with November glooms passing away and good news flowing in from key asset classes as soon as we stepped in December. There were expected oil output cuts from Saudi, Russia and Canada and a temporary U.S.-Sino trade truce.

Historically, December is the best month for stocks as the S&P 500 has offered 1.53% on average with 51 years of positive returns since 1950, as per moneychimp.com (read: Trump-Jingping Truce to Boost These ETFs).

Every year, traditional investors pin their hopes on the Santa Clause rally. This time, the Christmas month is likely to be merrier for the market on short-term trade truce between the United States and China agreed upon in the G-20 meet and strong hopes of output cut in the oil patch.

Though there could be one glitch in the end-of-season rally, in the form of the fourth Fed rate hike, the move is largely priced in at the current level. Also, the Fed chair Powell has lately come up with some apparent-dovish comments on the interest rate policy, which left investors relaxed. If there is no political gridlock caused by the divided congress in the United States or any downbeat news does not come up from the corporate or global front, 2018 should probably see a solid Santa rally.

Investors should note that, the S&P 500’s multiple has been squeezed 15% from the year-ago level to 15.8 times the forecast earnings, hovering around the cheapest level since early 2016. This makes it a beaten-down zone at the current level and ready for a quick rebound.

Against this backdrop, investors must be interested in finding out all possible ETFs to win over the unseen or cash in on some inevitable euphoria. For them, below we have highlighted a few ETFs.

ProShares Long Online/Short Stores ETF (CLIX - Free Report)

The retail landscape is changing, with online sales gradually taking control. Online retailing is likely to hit a home run this holiday season as evident from upbeat Thanksgiving and Black Friday data. Sales on web jumped 28% to a record $3.7 billion and 23.6% to $6.22 billion on these two events, respectively.

Adobe expects online Cyber Monday sales to set another record of $7.8 billion, up nearly 18% from last year. The fall in store traffic is a little higher than past years, per RetailNext (read: Holiday Season 2018 Should Make This ETF Jump in Joy).

VanEck Vectors Retail ETF (RTH - Free Report)

Apart from the e-tailing, investors should also pay attention to the overall retail spectrum in the all-important holidays season. Amazon, Home Depot and Walmart are top three holdings of the fund.

Invesco DWA Technology Momentum ETF (PTF - Free Report)

Tech stocks have been beaten badly of late. However, latest U.S.-China trade treaty may boost the space in December on cheaper valuation. This is because semiconductor and technology hard ware companies have considerable weight and are exposed to maximum risks on rising trade tensions. Also, holiday season buying for electronic and tech gadgets may boost the space (read: 5 Sector ETFs Most Exposed to Trade Tensions).

WisdomTree Emerging Markets Quality Dividend Growth ETF (DGRE - Free Report)

This is yet another beneficiary of cheap valuation and U.S.-Sino trade ceasefire. Emerging market (EM) shares hit a two-month high on Monday on trade news. Already, dovish Fed comments led EM stocks to witness their best month in 2018 in November. If these were not enough, the U.S. Treasury yield curve inverted on Dec 3 for the first time since 2007. This may keep a check on the rise in the greenback and boost EM assets.  Notably, DGRE is heavy on China, South Korea, Taiwan and India.

Russell Midcap Pure Growth Invesco ETF

While large companies are normally known for stability and the smaller ones for growth, mid-caps offer the best of both, allowing growth and stability in portfolios simultaneously. These middle-of-road securities are arguably safer options.

A subdued greenback is good for larger stocks that are quite exposed to international affairs and economies. Thus, with this option, investors can have the benefits of both – upbeat economic activity in the United States and a rebound in some corners of the global markets.

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