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Uncertain About a Santa Rally in 2022? 5 ETF Picks
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The Santa Claus Rally refers to the jump in stock prices in the week between Christmas and New Year's Day. A consensus carried out from 1950 to 2021 has revealed that December offered positive returns in 54 years and negative returns in 18 years, with an average return of 1.42%, one of the best seen in a year, as per moneychimp.com. It is believed that a Santa Clause Rally normally drives markets, this time of the year.
There are several factors behind this surge, including "tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week" as per investopedia.
Will 2022 See a Santa Rally Despite Recessionary Fear?
The scenario is still uncertain, with Omicron’s new variants rearing their ugly heads and rising rate-induced recessionary fears flexing muscles. Still, holiday shopping is in full swing. Thanksgiving, Black Friday, Cyber Monday and Super Saturday have gone by and all occasions have recorded decent retail sales. Against this edgy backdrop, we highlight a few ETFs that could prove to be winning bets in this Christmas week.
Oil prices gained lately due to tighter supply bets as Russia is reportedly considering output cuts. Russia said it may cut oil production to offset price caps on Russian crude imposed by the G7 nations and the European Union, as quoted on investing.com. Russia may slash its oil output by 500,000-700,000 barrels a day in early 2023, Deputy Prime Minister Alexander Novak reportedly said in a media interview on Friday, the investing.com article noted. As a result, oil-related investments should gain in prices.
This product offers targeted exposure to U.S. stocks selling food and beverage products. The increasing global population is the main driver of the U.S. food industry. This is again a non-cyclical industry and remains less ruffled by economic headwinds.
Though November’s U.S. retail sales figures were disappointing, there were considerable increases in sales in the segments of grocery stores and health & personal care stores. This indicates Americans’ shopping patterns amid recessionary talks.
While e-commerce remained the hot spot, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience this year. Notably, searches for Black Friday discounts on Walmart skyrocketed 386% year over year in 2022, brushing aside e-Commerce behemoth Amazon. Miscellaneous store retailers too recorded decent sales growth in November.
Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) – Zacks Rank #3 (Hold)
We may see a rise in bond yields in the coming days if the Fed continues to hike rates to contain inflation. If rates rise, value funds may take an upper hand over growth investing. Plus, small caps are more domestically-focused. And the segment performs better in a rising dollar environment.
The utilities sector is a great investment for those seeking yields and safety but should be avoided by those expecting market-beating returns. It is among the most stable sectors over the long haul and its players are likely to be decent investments. Though the sector underperforms in a rising rate environment, the sheer non-cyclical nature of the sector has kept the ETF on the radar.
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Uncertain About a Santa Rally in 2022? 5 ETF Picks
The Santa Claus Rally refers to the jump in stock prices in the week between Christmas and New Year's Day. A consensus carried out from 1950 to 2021 has revealed that December offered positive returns in 54 years and negative returns in 18 years, with an average return of 1.42%, one of the best seen in a year, as per moneychimp.com. It is believed that a Santa Clause Rally normally drives markets, this time of the year.
There are several factors behind this surge, including "tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week" as per investopedia.
Will 2022 See a Santa Rally Despite Recessionary Fear?
The scenario is still uncertain, with Omicron’s new variants rearing their ugly heads and rising rate-induced recessionary fears flexing muscles. Still, holiday shopping is in full swing. Thanksgiving, Black Friday, Cyber Monday and Super Saturday have gone by and all occasions have recorded decent retail sales. Against this edgy backdrop, we highlight a few ETFs that could prove to be winning bets in this Christmas week.
ETFs in Focus
Energy Select Sector SPDR ETF (XLE - Free Report) – Zacks Rank #1 (Strong Buy)
Oil prices gained lately due to tighter supply bets as Russia is reportedly considering output cuts. Russia said it may cut oil production to offset price caps on Russian crude imposed by the G7 nations and the European Union, as quoted on investing.com. Russia may slash its oil output by 500,000-700,000 barrels a day in early 2023, Deputy Prime Minister Alexander Novak reportedly said in a media interview on Friday, the investing.com article noted. As a result, oil-related investments should gain in prices.
Invesco Dynamic Food & Beverage ETF (PBJ - Free Report) – Zacks Rank #1
This product offers targeted exposure to U.S. stocks selling food and beverage products. The increasing global population is the main driver of the U.S. food industry. This is again a non-cyclical industry and remains less ruffled by economic headwinds.
Though November’s U.S. retail sales figures were disappointing, there were considerable increases in sales in the segments of grocery stores and health & personal care stores. This indicates Americans’ shopping patterns amid recessionary talks.
VanEck Retail ETF (RTH - Free Report) – Zacks Rank #2 (Buy)
While e-commerce remained the hot spot, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience this year. Notably, searches for Black Friday discounts on Walmart skyrocketed 386% year over year in 2022, brushing aside e-Commerce behemoth Amazon. Miscellaneous store retailers too recorded decent sales growth in November.
The fund houses all key retail companies like Amazon (14.7%), Wal-Mart (8.5%) and Target (4.4%). Hence, this seems to be a good retail pick (read: Be Mindful About Retail ETF Investing This Holiday Season).
Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) – Zacks Rank #3 (Hold)
We may see a rise in bond yields in the coming days if the Fed continues to hike rates to contain inflation. If rates rise, value funds may take an upper hand over growth investing. Plus, small caps are more domestically-focused. And the segment performs better in a rising dollar environment.
Utilities Select Sector SPDR ETF (XLU - Free Report) – Zacks Rank #2
The utilities sector is a great investment for those seeking yields and safety but should be avoided by those expecting market-beating returns. It is among the most stable sectors over the long haul and its players are likely to be decent investments. Though the sector underperforms in a rising rate environment, the sheer non-cyclical nature of the sector has kept the ETF on the radar.