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ETFs & Stocks to Tap for 'Thanksgiving Trade' 2020

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According to the Stock Trader’s Almanac, stocks normally offer solid returns on the Wednesday before Thanksgiving and the Friday after combined, albeit at a low volume. This makes us analyze, will the U.S. stock market continue the age-old wining trend this year too or not? Let’s find out.

Flurry of Vaccine News Hits Market; More in Pipeline

Vaccine hopes have taken Wall Street to new highs this month. In early November, Pfizer Inc. (PFE) and BioNTech SE (BNTX) came up with encouraging updates on their coronavirus vaccine candidate, BNT162b2. The candidate finally reflected a vaccine efficacy rate of 95% last week. Moderna (MRNA) also said that its vaccine was more than 94% effective in preventing the virus.

And the third good news came on Nov 23 as AstraZeneca (AZN) said its vaccine, developed in collaboration with the University of Oxford, was evaluated over two different dosing regimens. “One showed an effectiveness of 90% when trial participants received a half dose, followed by a full dose at least one month apart. The other dosing regimen showed 62% efficacy when given as two full doses at least one month apart,” per CNBC. Overall, it showed an average 70% effectiveness.

Sanofi (SNY) and GlaxoSmithKline (GSK) have announced that their two-dose recombinant protein vaccine can be stored between 2°C- 8°C. The vaccine may be available next June. Johnson & Johnson’s (JNJ) COVID-19 vaccine, which is in the pipeline, could be stable at refrigerated temperatures for at least three months, if successful.

Vaccine news led the Dow Jones, the S&P 500 and the Russell 2000 to new highs. The Dow Jones finished over 30,000 for the first time ever. So, the forward rally from here depends largely on optimistic news from pharma.

Oil on Upbeat Mode

Oil reached its strongest level since early September on vaccine hopes and the resultant uptick in the demand outlook. The coronavirus-led global slowdown had crippled oil demand. Due to the second wave of the virus attack, major parts of Europe like Germany, France and the U.K. are under lockdown now. In such a scenario, the vaccine news has every reason to boost economic growth, oil demand and the energy sector.

Upbeat Holiday Sales Expected Despite COVID-19

NRF noted that the retail sector has witnessed a V-shaped recovery as aggregate retail sales have grown  both sequentially and year over year each month since June. For the first 10 months of this year, retail sales were up 6.4% versus the first 10 months of 2019, per NRF.

Ecommerce sales were up 36.7% year over year during the third quarter. NRF expects that online and other non-store sales will grow between 20% and 30% this year. Overall, the retail sector is expected to log a “strong finish” to 2020 despite COVID-19.

A survey from NRF at the start of November found more than 40% of consumers had begun their holiday shopping earlier-than-normal this year. Clothing and accessories are the most popular gift items, per the survey.

“The charts, as interpreted by the legendary [investors] Larry Williams, suggest that retail tends to roar every year from Thanksgiving through Christmas, and this year he recommends loading up on the retailers with the most digital exposure,” said CNBC’s Jim Cramer. Since William’s Fourth of July trade turned out well, Cramer said, “I bet he’s going to be right about the Thanksgiving trade.”

ETF & Stock Picks

Against this backdrop, we bet big on a year-end rally. Investors are likely to see a solid bounce in equities this Thanksgiving and after.

ETF Bets

ETF picks are all top ranked.

SPDR S&P Retail ET (XRT - Free Report) – Zacks Rank #2 (Buy)

Vanguard Industrials ETF (VIS - Free Report) – Zacks Rank #2

SPDR S&P 400 Mid Cap Value ETF ((MDYV - Free Report) – Zacks Rank #3 (Hold)

First Trust Financials Alphadex Fund ((FXO - Free Report) – Zacks Rank #3

Stock Bets

Stock picks are top ranked with a Value score of A and P/E of less than 20 times.

Ally Financial Inc. (ALLY - Free Report)  – P/E 12.27x, Rank #1

Delta Apparel Inc. (DLA - Free Report) – P/E 14.83x, Rank #1

General Motors Company (GM - Free Report) – P/E 10.01x, Rank #1

Beazer Homes USA Inc. (BZH - Free Report) – P/E 7.56x, Rank #1

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