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ETF Strategies to Gain From Vaccine Hopes & Biden's Transition
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The Wall Street is showing unprecedented optimism as positive news regarding coronavirus vaccines are pouring in. The 30-stock Dow Jones Industrial Average crossed the 30,000-mark for the first time on Nov 24. Meanwhile, the S&P 500 rose 1.6% and saw a record close. Also, the Nasdaq Composite gained 1.3% on the same day. The small-cap Russell 2000 also touched an all-time high, rising 1.9%.
Notably, the Dow Jones has risen more than 13% for November, registering its biggest monthly gain since 1987. Moreover, the S&P 500 and Nasdaq rose 11.2% and 10.3%, respectively, in the same month. This will be their best monthly gain since April.
Another factor that has been well-received by investors is decreasing political uncertainty as the Trump administration is allowing federal resources to be used for President-elect Joe Biden’s transition into office, which was informed about by General Services Administration chief Emily Murphy, per a CNBC article. Moreover, Biden’s plan to nominate previous Federal Reserve Chair Janet Yellen for Treasury secretary has also led this optimism wave. Going by a CNBC article, Yellen is known for an impressive run during her tenure as Fed chair from 2014 to 2018. During that period, the S&P 500 gained about 60% along with low rates.
There has also been an influx of positive coronavirus treatment news. Regeneron Pharmaceuticals, Inc. (REGN) has announced that the FDA has given Emergency Use Authorization (EUA) to its antibody cocktail, casirivimab and imdevimab administered together (formerly known as REGN-COV2 or REGEN-COV2), a therapy currently being investigated for use in COVID-19. Eli Lilly and Company (LLY) and partner Incyte also recently announced that the FDA has issued an EUA for the distribution and emergency use of baricitinib to be used in combination with remdesivir in hospitalized adult and pediatric patients, two years of age or older with suspected or laboratory-confirmed COVID-19, who require supplemental oxygen, invasive mechanical ventilation, or extracorporeal membrane oxygenation.
Going on, three leading coronavirus vaccine makers — Moderna (MRNA), AstraZeneca (AZN) /Oxford University and Pfizer (PFE)/BioNTech — announced encouraging results for their respective candidates in November. Each vaccine achieved efficacy rate that met the respective study’s primary endpoint. All three vaccine candidates appeared to be well tolerated and safe.
ETF Strategies to Follow
Here we discus certain ETF strategies to help investors make the most of the upbeat vaccine data amid the coronavirus crisis:
Momentum ETFs to Consider
While the broader stock market is expected to gain on optimism surrounding the rebounding U.S. economy and positive developments in coronavirus vaccine research, momentum investing will likely take centerstage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report) , Invesco DWA Momentum ETF (PDP - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , VictoryShares USAA MSCI USA Value Momentum ETF (ULVM) and SPDR Russell 1000 Momentum Focus ETF (ONEO) (read: Value or Growth: Which ETFs to Play Ahead?).
Value ETFs to Play
Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. The introduction of a coronavirus vaccine will help in combatting the pandemic, supporting the economy recovery and boosting consumer spending and thus, lifting value stocks. Moreover, value securities have had a tough time this year as slow growth and lower yields prompted investors’ shift to fast-growing stocks, especially the technology sector. As such, value stocks are cheaper than the growth ones at the current valuation.
Small-caps stocks, as indicated by the Russell 2000 Index, has been outperforming the broader-market and is hitting new all-time highs. This upside is being largely led by the small-cap companies that are closely tied to the U.S. economy and thus well-positioned to outperform when the economy improves. These stocks generally outperform on improving U.S. economy. The latest release of economic data is also indicating toward a growing economy. Therefore, investors can consider Schwab U.S. Small-Cap ETF (SCHA - Free Report) , SPDR S&P 600 Small Cap ETF , Vanguard S&P Small-Cap 600 ETF (VIOO - Free Report) and John Hancock Multifactor Small Cap ETF (JHSC) (read: 4 Reasons to Bet on Small-Cap ETFs Now).
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ETF Strategies to Gain From Vaccine Hopes & Biden's Transition
The Wall Street is showing unprecedented optimism as positive news regarding coronavirus vaccines are pouring in. The 30-stock Dow Jones Industrial Average crossed the 30,000-mark for the first time on Nov 24. Meanwhile, the S&P 500 rose 1.6% and saw a record close. Also, the Nasdaq Composite gained 1.3% on the same day. The small-cap Russell 2000 also touched an all-time high, rising 1.9%.
Notably, the Dow Jones has risen more than 13% for November, registering its biggest monthly gain since 1987. Moreover, the S&P 500 and Nasdaq rose 11.2% and 10.3%, respectively, in the same month. This will be their best monthly gain since April.
Another factor that has been well-received by investors is decreasing political uncertainty as the Trump administration is allowing federal resources to be used for President-elect Joe Biden’s transition into office, which was informed about by General Services Administration chief Emily Murphy, per a CNBC article. Moreover, Biden’s plan to nominate previous Federal Reserve Chair Janet Yellen for Treasury secretary has also led this optimism wave. Going by a CNBC article, Yellen is known for an impressive run during her tenure as Fed chair from 2014 to 2018. During that period, the S&P 500 gained about 60% along with low rates.
There has also been an influx of positive coronavirus treatment news. Regeneron Pharmaceuticals, Inc. (REGN) has announced that the FDA has given Emergency Use Authorization (EUA) to its antibody cocktail, casirivimab and imdevimab administered together (formerly known as REGN-COV2 or REGEN-COV2), a therapy currently being investigated for use in COVID-19. Eli Lilly and Company (LLY) and partner Incyte also recently announced that the FDA has issued an EUA for the distribution and emergency use of baricitinib to be used in combination with remdesivir in hospitalized adult and pediatric patients, two years of age or older with suspected or laboratory-confirmed COVID-19, who require supplemental oxygen, invasive mechanical ventilation, or extracorporeal membrane oxygenation.
Going on, three leading coronavirus vaccine makers — Moderna (MRNA), AstraZeneca (AZN) /Oxford University and Pfizer (PFE)/BioNTech — announced encouraging results for their respective candidates in November. Each vaccine achieved efficacy rate that met the respective study’s primary endpoint. All three vaccine candidates appeared to be well tolerated and safe.
ETF Strategies to Follow
Here we discus certain ETF strategies to help investors make the most of the upbeat vaccine data amid the coronavirus crisis:
Momentum ETFs to Consider
While the broader stock market is expected to gain on optimism surrounding the rebounding U.S. economy and positive developments in coronavirus vaccine research, momentum investing will likely take centerstage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report) , Invesco DWA Momentum ETF (PDP - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , VictoryShares USAA MSCI USA Value Momentum ETF (ULVM) and SPDR Russell 1000 Momentum Focus ETF (ONEO) (read: Value or Growth: Which ETFs to Play Ahead?).
Value ETFs to Play
Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. The introduction of a coronavirus vaccine will help in combatting the pandemic, supporting the economy recovery and boosting consumer spending and thus, lifting value stocks. Moreover, value securities have had a tough time this year as slow growth and lower yields prompted investors’ shift to fast-growing stocks, especially the technology sector. As such, value stocks are cheaper than the growth ones at the current valuation.
While there are several options in the value ETF world, we have highlighted five funds that offer broad-based exposure to the U.S. stock market like Vanguard Value ETF (VTV - Free Report) , iShares S&P 500 Value ETF (IVE - Free Report) , iShares Russell 1000 Value ETF (IWD - Free Report) , Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) and SPDR Portfolio S&P 500 Value ETF (SPYV) (read: Spread of Top-Ranked Value ETFs to Bet on Vaccine Optimism).
Small-Cap ETFs to Look Out For
Small-caps stocks, as indicated by the Russell 2000 Index, has been outperforming the broader-market and is hitting new all-time highs. This upside is being largely led by the small-cap companies that are closely tied to the U.S. economy and thus well-positioned to outperform when the economy improves. These stocks generally outperform on improving U.S. economy. The latest release of economic data is also indicating toward a growing economy. Therefore, investors can consider Schwab U.S. Small-Cap ETF (SCHA - Free Report) , SPDR S&P 600 Small Cap ETF , Vanguard S&P Small-Cap 600 ETF (VIOO - Free Report) and John Hancock Multifactor Small Cap ETF (JHSC) (read: 4 Reasons to Bet on Small-Cap ETFs Now).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>