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November Rally Likely to Drag Into December: 5 ETF Picks
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U.S. stocks were super steady in November on back-to-back upbeat vaccine update from pharma companies likePfizer, Moderna and AstraZeneca. This raised hopes of a return to normalcy sooner than expected. Moreover, chances of a divided Congress in the United States, which means status quo and the likelihood of no major policy changes in the medium term, aided the equity rally.
As a result, the S&P 500 (up 10.8%), the Dow Jones (up 11.9%), the Nasdaq Composite (up 11.8%) and the Russell 2000 (up 18.3%) — all put up a great show last month. The Dow Jones logged its best month since 1987 (and its best November since 1928).
The S&P 500 posted its best November ever. The Nasdaq Composite recorded its best monthly performance since April 2020. The industrials and financials sectors clocked their best month since April 2009 while the energy sector as represented by the ETF XLE saw its second-best month ever.
On Dec 1, a group of bipartisan senators announced a $908 billion "framework" for COVID-19 relief. This stimulus hope is a great positive. Hence, with a favorable investing backdrop at the start of December, we expect the November rally to continue. Against this backdrop, below we highlight a few ETF picks for the current month.
The price of bitcoin hit a new all-time-high on Nov 30, helped by institutional buying. Bitcoin registered its previous all-time high in mid-December 2017. Corporations’ greater acceptance in allowing customers to hold bitcoin and other virtual coins in their online wallets and shopping has been favoring the cryptocurrency. Several central banks are considering the rollout of digital currency lately (read: ETFs to Gain As Bitcoin Surges).
Facebook-backed cryptocurrency Libra has also been rebranded “Diem” in an effort to gain regulatory approval by refurbishing the project in a simpler manner. Though investors cannot lay their hands on a digital currency ETF now, they can definitely familiarize with the concept through blockchain ETFs like BLCN.
S&P Dow Jones Indices will add Tesla Inc. to its benchmark S&P 500 Index all at a time on Dec 21. “(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” S&P Dow Jones Indices, as quoted on Reuters. “With a stock market value over $400 billion, Tesla will be among the most valuable companies ever added” to the S&P 500. In any case, Tesla has been a hot stock this year.
Tesla’s “inclusion means investment funds indexed to the S&P 500 will have to sell about $51 billion worth of shares of companies already in the S&P 500 and use that money to buy shares of Tesla, so that their portfolios correctly reflect the index”, according to S&P Dow Jones Indices, quoted on Reuters (read: ETFs to Play as Tesla Likely to Join the S&P 500 in December).
This in turn may benefit Tesla-heavy ETF ARKQ. The fund stresses on autonomous technology and robotics companies that follow theme of disruptive innovation.
According to Sam Stovall, chief investment strategist at CFRA Research in New York, “November has historically been the best month for the Russell 2000, however, December typically yields the second-best monthly performance.” The Russell 2000 delivered an average return of 2.15% in December, jumping 76% of the time for the highest occurrence of advancement, compared with an average gain of 1.47% for the S&P 500 and a 73% frequency of gains, Stovall pointed out, as quoted in a source. Vaccine hopes and Biden’s transition, in any case, will make the case for small-cap value investing stronger (read: Why Is This the Right Time to Bet on Small-Cap Value ETFs?).
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. 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. Amazon also had its “biggest holiday season to date” as customers turned to online shopping and dumped the in-store ones (read: ETFs to Win/Lose From Thanksgiving Amid COVID-19 Restrictions).
As risk-on sentiments are likely to continue for some more time, we will end up seeing in an uptick in treasury yields. In this kind of scenario, betting big on a product that offers benchmark-beating returns would be an intriguing option. The fund VYM is consists of common stocks of companies that pay dividends that generally are higher than average. It currently yields about 3.22% annually (read: ETFs to Play as Vaccine News Looks to Outdo Virus Fear).
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November Rally Likely to Drag Into December: 5 ETF Picks
U.S. stocks were super steady in November on back-to-back upbeat vaccine update from pharma companies likePfizer, Moderna and AstraZeneca. This raised hopes of a return to normalcy sooner than expected. Moreover, chances of a divided Congress in the United States, which means status quo and the likelihood of no major policy changes in the medium term, aided the equity rally.
As a result, the S&P 500 (up 10.8%), the Dow Jones (up 11.9%), the Nasdaq Composite (up 11.8%) and the Russell 2000 (up 18.3%) — all put up a great show last month. The Dow Jones logged its best month since 1987 (and its best November since 1928).
The S&P 500 posted its best November ever. The Nasdaq Composite recorded its best monthly performance since April 2020. The industrials and financials sectors clocked their best month since April 2009 while the energy sector as represented by the ETF XLE saw its second-best month ever.
On Dec 1, a group of bipartisan senators announced a $908 billion "framework" for COVID-19 relief. This stimulus hope is a great positive. Hence, with a favorable investing backdrop at the start of December, we expect the November rally to continue. Against this backdrop, below we highlight a few ETF picks for the current month.
Siren Nasdaq NexGen Economy ETF (BLCN - Free Report)
The price of bitcoin hit a new all-time-high on Nov 30, helped by institutional buying. Bitcoin registered its previous all-time high in mid-December 2017. Corporations’ greater acceptance in allowing customers to hold bitcoin and other virtual coins in their online wallets and shopping has been favoring the cryptocurrency. Several central banks are considering the rollout of digital currency lately (read: ETFs to Gain As Bitcoin Surges).
Facebook-backed cryptocurrency Libra has also been rebranded “Diem” in an effort to gain regulatory approval by refurbishing the project in a simpler manner. Though investors cannot lay their hands on a digital currency ETF now, they can definitely familiarize with the concept through blockchain ETFs like BLCN.
ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report)
S&P Dow Jones Indices will add Tesla Inc. to its benchmark S&P 500 Index all at a time on Dec 21. “(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” S&P Dow Jones Indices, as quoted on Reuters. “With a stock market value over $400 billion, Tesla will be among the most valuable companies ever added” to the S&P 500. In any case, Tesla has been a hot stock this year.
Tesla’s “inclusion means investment funds indexed to the S&P 500 will have to sell about $51 billion worth of shares of companies already in the S&P 500 and use that money to buy shares of Tesla, so that their portfolios correctly reflect the index”, according to S&P Dow Jones Indices, quoted on Reuters (read: ETFs to Play as Tesla Likely to Join the S&P 500 in December).
This in turn may benefit Tesla-heavy ETF ARKQ. The fund stresses on autonomous technology and robotics companies that follow theme of disruptive innovation.
Vanguard Russell 2000 Value ETF (VTWV - Free Report)
According to Sam Stovall, chief investment strategist at CFRA Research in New York, “November has historically been the best month for the Russell 2000, however, December typically yields the second-best monthly performance.” The Russell 2000 delivered an average return of 2.15% in December, jumping 76% of the time for the highest occurrence of advancement, compared with an average gain of 1.47% for the S&P 500 and a 73% frequency of gains, Stovall pointed out, as quoted in a source. Vaccine hopes and Biden’s transition, in any case, will make the case for small-cap value investing stronger (read: Why Is This the Right Time to Bet on Small-Cap Value ETFs?).
SPDR S&P Retail ETF (XRT - Free Report)
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. 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. Amazon also had its “biggest holiday season to date” as customers turned to online shopping and dumped the in-store ones (read: ETFs to Win/Lose From Thanksgiving Amid COVID-19 Restrictions).
Vanguard High Dividend Yield ETF (VYM - Free Report)
As risk-on sentiments are likely to continue for some more time, we will end up seeing in an uptick in treasury yields. In this kind of scenario, betting big on a product that offers benchmark-beating returns would be an intriguing option. The fund VYM is consists of common stocks of companies that pay dividends that generally are higher than average. It currently yields about 3.22% annually (read: ETFs to Play as Vaccine News Looks to Outdo Virus Fear).
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 >>