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Santa Arrives! High Beta & Momentum ETFs to Tap the Rally

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Amid wild swings over the past couple of weeks, Wall Street rebounded, building up positive momentum thanks to rounds of upbeat economic data and easing Omicron fears. Santa has further bolstered chances of a market rally.

With the Santa Claus rally, most of the ETFs and stocks will likely see a nice boost. Notably, high-beta and high-momentum products are expected to outperform in the seven-day period and are intriguing choices for a short spell. These include Invesco S&P 500 High Beta ETF (SPHB - Free Report) , iShares MSCI USA Momentum Factor ETF (MTUM - Free Report) , Invesco DWA Momentum ETF (PDP - Free Report) , Invesco S&P MidCap Momentum ETF (XMMO - Free Report) , Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) and SPDR Russell 1000 Momentum Focus ETF (ONEO - Free Report) .

High-beta ETFs experience larger gains than the broader market counterparts in a bullish market while momentum investing looks to capture profits from buying hot stocks, which have shown an uptrend over a few weeks or months.

Santa Arrives With Bag Full of Gifts!

A Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to Sundial Capital Research, the S&P 500 gained an average of 2.66% during this period over the past 92 years with positive returns 77% of the time.

This is because year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing, and the “January effect” drive the stock north. This makes December the best-performing month for the stocks (read: Secret Santa ETFs That Could Surprise You).

The good tidings have already started flowing inbthis time. U.S. consumer confidence rose further in December, suggesting that the economy would continue to expand in 2022 despite a resurgence in COVID-19 infections and reduced fiscal stimulus. More consumers planned to buy houses and big-ticket items such as motor vehicles and major household appliances as well as go on a vacation over the next six months. Meanwhile, President Biden’s administration took steps to eliminate supply-chain bottlenecks, indicating that higher inflation will not last very long.

In another encouraging development, the Food and Drug Administration granted approval to Pfizer Inc's (PFE - Free Report) oral antiviral COVID-19 pill for at-risk people aged 12 and above. This makes it the first at-home treatment for the coronavirus and a potentially important tool in the fight against the fast-spreading Omicron variant. The medication could be available to patients as early as this weekend.

ETFs in Focus

Invesco S&P 500 High Beta ETF (SPHB - Free Report)

Invesco S&P 500 High Beta ETF tracks the performance of 102 stocks from the S&P 500 Index with the highest beta over the past 12 months. It is widely spread out across each security as none of them holds more than 1.7% of total assets. About 39% of the portfolio is allotted to information technology while consumer discretionary, financials and energy rounds off the next four with a double-digit allocation each.

Invesco S&P 500 High Beta ETF has amassed $1.5 billion in its asset base and charges 0.25% in expense ratio. The ETF trades in an average daily volume of 548,000 shares.

iShares MSCI USA Momentum Factor ETF (MTUM - Free Report)

iShares MSCI USA Momentum Factor ETF follows the MSCI USA Momentum SR Variant Index, holding 124 stocks exhibiting a relatively higher price momentum. It is pretty well spread out across components with none holding more than 5.1% of assets. iShares MSCI USA Momentum Factor ETF is skewed toward the information technology sector at 36.3% while financials and health care round off the next three positions.

iShares MSCI USA Momentum Factor ETF has accumulated $14.1 billion in its asset base and trades in a solid volume of about 1.2 million shares a day and charges 15 bps in fees per year.

Invesco DWA Momentum ETF (PDP - Free Report)

Invesco DWA Momentum ETF tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It holds 101 securities in its basket with none making up for more than 3.5% of assets. Information technology takes the top spot at 34.6% while healthcare, consumer discretionary and industrials round off the next two spots.

Invesco DWA Momentum ETF has amassed $1.8 billion in its asset base and charges 62 bps in annual fees. It trades in volume of 72,000 shares per day on average.

Invesco S&P MidCap Momentum ETF (XMMO - Free Report)

Invesco S&P MidCap Momentum ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It holds 79 stocks in its basket with key holdings in industrials, consumer discretionary, financials and materials (read: 5 ETF Bets for Those Undeterred by the Omicron Threat).

Invesco S&P MidCap Momentum ETF has AUM of $931.6 million and charges 33 bps in annual fees. It trades in an average daily volume of 43,000 and has a Zacks ETF Rank #1 (Strong Buy).

Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report)

Invesco S&P SmallCap Value with Momentum ETF offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. XSVM holds a basket of 121 stocks, each making up for less than 2.1% share. Invesco S&P SmallCap Value with Momentum ETF has a double-digit allocation each in financials, consumer discretionary and industrials.

Invesco S&P SmallCap Value with Momentum ETF has AUM of $472.3 million and an average daily volume of 117,000 shares. XSVM charges 39 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: 5 ETFs That Gained More Than 40% in 2021).

SPDR Russell 1000 Momentum Focus ETF (ONEO - Free Report)

SPDR Russell 1000 Momentum Focus ETF targets the large-cap securities with a combination of core factors (high-value, high-quality, and low-size characteristics) and a focus factor comprising high-momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index, holding 889 stocks in its basket with key holdings in industrials, technology, consumer discretionary and financials.

With AUM of $316.9 million, SPDR Russell 1000 Momentum Focus ETF charges an annual fee of 20 bps and trades in an average daily volume of 1,000. It carries a Zacks ETF Rank #3.