Wall Street is in great shape with the S&P 500 at a record high. However, the Nasdaq Composite is 2.1% shy of its 52-week high to kick off the Santa Rally. Per J.P. Morgan equity strategists, "in particular, outside of the Big 10 stocks in the U.S., equity drawdowns and multiple de-rating have been severe. Russell 3000 was down only -4% and Nasdaq Composite -7% from 12-month highs,”
as quoted on Yahoo Finance.
This calls for a compelling valuation as “conditions for a large sell-off are not in place right now given already low investor positioning, record buybacks, limited systematic amplifiers, and positive January seasonals," JPMorgan chief macro equity strategist Dubravko Lakos-Bujas said this week, as quoted on Yahoo Finance.
The current backdrop is lucrative for high-beta stocks. “On the secular growth side various high beta segments (such as payments, e-commerce, gaming, cybersecurity, biotech) have already seen significant multiple de-rating (i.e., -30% to -70%),” per J.P. Morgan.
The strategists revealed that this might open up solid gains in the coming days as fundamentals for many of the above-mentioned investing areas remain strong with continued strong secular growth and large addressable market sizes.
Lakos-Bujas also went on to elaborate that “historical analysis (30+ years) shows that the largest outperformance of high beta stocks tends to be in January (i.e., tax-loss harvesting, investor bottom fishing, etc.)."
Let’s elaborate on the ETF areas, their undervaluation and their potentials. Investors who prefer to follow J.P. Morgan’s strategists may find these options lucrative.
ETF Areas in Focus Payments ETFMG Prime Mobile Payments ETF ( IPAY Quick Quote IPAY - Free Report) – Down 20.7% from 52-Week High
The world is gradually moving toward digitization, increasing the dominance of technology in the financial sector. The pandemic-led social distancing boosted demand for digitization. A Market Data Forecast (MDF) report also highlights the growing opportunities in the global financial technology market, which is expected to see a CAGR of
23.4% between 2021 and 2026. According to the report, the fintech space is expected to reach a market value of around $324 billion by 2026. e-Commerce ProShares Online Retail ETF (– Down 38.7% from 52-Week High ONLN Quick Quote ONLN - Free Report)
The new normal of staying at home has increased tech activity and e-commerce inflation. Adobe data revealed that the latest online inflation data for November 2021 hit a
record high at a 3.5% year-over-year increase while prices dropped 2% sequentially due to holiday discounts. The year-over-year inflation in November represents the highest increase since 2014 and the 18th successive month of year-over-year online inflation (read: Online/e-Commerce Inflation at Record High: ETFs to Win). Video Gaming Roundhill Sports Betting & iGaming ETF (– Down 25.2% from 52-Week High BETZ Quick Quote BETZ - Free Report)
The global gaming market size is expected to see a CAGR of 13.20% between 2021 and 2028 to reach about $
545.98 billion by 2028. Fortune Business Insights pointed out that the market was valued at $203.12 billion in 2020. Cybersecurity ETFMG Prime Cyber Security ETF (– Down 8.6% from 52-Week High HACK Quick Quote HACK - Free Report)
The cyber security industry has gained immense popularity in recent years and is the fastest-growing corner of the broad technology space. This is because cyber attacks on enterprises and government agencies are widespread with rapidly growing blockchain, IoT and 5G technology, raising the need for more stringent cyber security from hackers.
Biotech iShares Biotechnology ETF (– Down 13.6% from 52-Week High IBB Quick Quote IBB - Free Report)
As long as COVID-19 is there, the demand for more therapies and boosters will be strong, bringing the focus to the biotech space. Moreover, increasing mergers and acquisition (M&A) deals, growing AI dominance and favorable regulatory tidings continue to work in favor of the biotech market.