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Wall Street displayed a muted performance last week due to rising rate worries. The S&P 500 and the Nasdaq snapped the prolonged winning streak. According to Tom Lee, a renowned strategist at Fundstrat, the recent 2% slump in the stock market presents yet another lucrative opportunity for investors to employ the “Buy the Dip” strategy, as quoted on Business Insider.
Despite concerns about a narrow but heightened market strength after the S&P 500's amazing 14% year-to-date rally, Lee put stress on the importance of buying stocks at this stage. Let’s delve into the reasons behind Lee's theory.
IPO Market Resurgence
One of the factors fueling Lee's optimism is the renewed surge in the initial public offering (IPO) market. Lee hinted that the successful debut of Cava and other high-profile IPOs, point toward investor appetite for risk-on exposure. In June alone, IPO issuance touched $30 billion, breezing past the $19 billion issued in the whole of June 2022.
Solid Cash Reserves on the Sidelines
Per Lee, there is a substantial amount of sidelined cash, which amounts to a whopping $5.5 trillion. Notably, data from Pantheon Macro reveals that the top 1% of households have increased their cash balances by 52% since 2019, while 80th to 99th percentile boosted their cash balances by 32%. As confidence builds up, investors may be interested in using their cash reserves in the markets, which will provide Wall Street an upward momentum.
Economic Resilience
Despite worries about a likely recession, Lee remains optimistic about the economy's growth. Recent economic data points point to that optimism. Housing starts, homebuilders’ confidence, jobs report, retail sales and a better outlook for corporate earnings hint at the U.S. economic resilience.
2Q23 Earnings Season: A Defining moment for Risk-On Investments?
As the second-quarter reporting cycle comes closer, Lee suggests that earnings per share growth, excluding the Energy sector, may turn positive year over year. Notably, Per the Earnings Trends issued on Jun 21, 2023, the expected earnings growth for the S&P 500 ex-Energy for the second quarter is likely to be a decline of 3.9% over a rise of 2.7%. This could be a positive, driving investors toward markets all over again.
ETFs in Focus
Against this backdrop, below, we highlight a few ETFs that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and lost/remained flat over the past week. If you believe in the above-said theory, you may use the “buy-the-dip” strategy for these ETFs.
Invesco S&P 500 Equal Weight Health Care ETF (RSPH - Free Report)
Zacks Rank: #2
Past Week Performance: negative 0.7%
ProShares Russell 2000 Dividend Growers ETF (SMDV - Free Report)
Image: Bigstock
Should You "Buy the Dip" & Grab These ETFs?
Wall Street displayed a muted performance last week due to rising rate worries. The S&P 500 and the Nasdaq snapped the prolonged winning streak. According to Tom Lee, a renowned strategist at Fundstrat, the recent 2% slump in the stock market presents yet another lucrative opportunity for investors to employ the “Buy the Dip” strategy, as quoted on Business Insider.
Despite concerns about a narrow but heightened market strength after the S&P 500's amazing 14% year-to-date rally, Lee put stress on the importance of buying stocks at this stage. Let’s delve into the reasons behind Lee's theory.
IPO Market Resurgence
One of the factors fueling Lee's optimism is the renewed surge in the initial public offering (IPO) market. Lee hinted that the successful debut of Cava and other high-profile IPOs, point toward investor appetite for risk-on exposure. In June alone, IPO issuance touched $30 billion, breezing past the $19 billion issued in the whole of June 2022.
Solid Cash Reserves on the Sidelines
Per Lee, there is a substantial amount of sidelined cash, which amounts to a whopping $5.5 trillion. Notably, data from Pantheon Macro reveals that the top 1% of households have increased their cash balances by 52% since 2019, while 80th to 99th percentile boosted their cash balances by 32%. As confidence builds up, investors may be interested in using their cash reserves in the markets, which will provide Wall Street an upward momentum.
Economic Resilience
Despite worries about a likely recession, Lee remains optimistic about the economy's growth. Recent economic data points point to that optimism. Housing starts, homebuilders’ confidence, jobs report, retail sales and a better outlook for corporate earnings hint at the U.S. economic resilience.
2Q23 Earnings Season: A Defining moment for Risk-On Investments?
As the second-quarter reporting cycle comes closer, Lee suggests that earnings per share growth, excluding the Energy sector, may turn positive year over year. Notably, Per the Earnings Trends issued on Jun 21, 2023, the expected earnings growth for the S&P 500 ex-Energy for the second quarter is likely to be a decline of 3.9% over a rise of 2.7%. This could be a positive, driving investors toward markets all over again.
ETFs in Focus
Against this backdrop, below, we highlight a few ETFs that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and lost/remained flat over the past week. If you believe in the above-said theory, you may use the “buy-the-dip” strategy for these ETFs.
Invesco S&P 500 Equal Weight Health Care ETF (RSPH - Free Report)
Zacks Rank: #2
Past Week Performance: negative 0.7%
ProShares Russell 2000 Dividend Growers ETF (SMDV - Free Report)
Zacks Rank: #2
Past Week Performance: negative 4.4%
First Trust NASDAQ Bank ETF (FTXO - Free Report)
Zacks Rank: #2
Past Week Performance: negative 5.0%
Invesco PureBeta MSCI USA Small Cap ETF
Zacks Rank: #1
Past Week Performance: negative 0.3%
Invesco S&P 500 Equal Weight Communication Services ETF (RSPC - Free Report)
Zacks Rank: #1
Past Week Performance: negative 2.2%