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Wall Street Hits 2-Year Best Mark: Momentum ETFs to Play
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Wall Street appears ready to rally, with the S&P 500 notching its eight straight days of gains on Wednesday and the Nasdaq continuing its own streak for nine successive sessions. It's the most consecutive straight days of gains since November 2021. The positive shift is primarily fueled by anticipation of a less-hawkish Fed going forward and an upbeat corporate earnings season as well as oil price slump.
Although words of caution from several hawkish Fed members halted the winning momentum in Wall Street at the start of the week, about 90% of traders are sticking with their bet that there won't be a rate hike this year, and 25% expect a rate cut in March, according to the CME FedWatch tool. This belief has once again brought back optimism in the market.
Is Fed Done Raising Rates?
Bets that the Fed is done raising rates strengthened on softer jobs data for the month of October. The Fed announced on Nov 1, 2023, that it would keep its benchmark interest rate within the range of 5.25% to 5.50%. Agreed, the central bank has left the door open for potential future actions as it continues to grapple with sticky inflation.
But bets over such hawkish steps have weakened lately on slower economic growth. CME FedWatch tool revealed that there is a 90.4% chance of the rates remaining the same in December (at the time of writing) and an 82.9% chance that the Fed will again stay put in late January.
Resilient U.S. Consumers & Holiday Season
Despite sticky inflation, U.S. consumers have been showing strong resilience. Retail sales in the United States grew 0.7% sequentially in September 2023, following an upwardly revised 0.8% uptick in August and beating forecasts of a 0.3% advance. American consumers are expected to splurge on discretionary items through the busy holiday shopping season.
The National Retail Federation (NRF) stated that consumers are estimated to shell out between $957.3 billion to $966.6 billion during November and December. Thus, spending will increase between 3% and 4% over the same period last year. The growth may be slightly lower compared to recent years, but it’s still in line with the growth rate from 2010 to 2019, when the average annual holiday outlays jumped 3.6%.
Upbeat Corporate Earnings
Better-than-expected earnings also added to the market strength. With more than 88% of the Q3 results already out, earnings growth for the quarter is on track to turn positive despite the significant Energy sector drag. This positive earnings growth in Q3 comes after three back-to-back quarters of declines.
Total earnings for the 88.2% of S&P 500 members that have reported results so far are up 1.1% from the same period last year on 1.7% higher revenues, with 81.6% beating EPS estimates and 61.7% beating revenue estimates per Earnings Trends issued on Nov 8, 2023. Earnings growth represents a notable improvement when compared to the recent quarters.
Time for Momentum ETFs?
These favorable conditions suggest that Wall Street is on the brink of a rally, presenting an opportune time to invest in Momentum ETFs. These ETFs are designed to capitalize on existing market trends by investing in stocks that have shown a tendency to continue their current trajectory. As Wall Street's optimism continues to grow, these funds are likely to yield significant returns.
ETFs in Focus
Invesco Dorsey Wright Consumer Cyclicals Momentum ETF (PEZ - Free Report) , VanEck Social Sentiment ETF (BUZZ - Free Report) , Invesco Dorsey Wright Technology Momentum ETF (PTF - Free Report) , Momentumshares US Quantitative Momementum ETF (QMOM - Free Report) , QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM - Free Report) and SPDR S&P 1500 Momentum Tilt ETF (MMTM - Free Report) advanced in the range of 16.6% to 5.8% in the past week.
Word of Caution
It is important to remember that while the signs are promising, all investments carry inherent risks. The geopolitical landscape is unpredictable, and any changes in Fed rate hopes could hamper the predicted rally.
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Wall Street Hits 2-Year Best Mark: Momentum ETFs to Play
Wall Street appears ready to rally, with the S&P 500 notching its eight straight days of gains on Wednesday and the Nasdaq continuing its own streak for nine successive sessions. It's the most consecutive straight days of gains since November 2021. The positive shift is primarily fueled by anticipation of a less-hawkish Fed going forward and an upbeat corporate earnings season as well as oil price slump.
Although words of caution from several hawkish Fed members halted the winning momentum in Wall Street at the start of the week, about 90% of traders are sticking with their bet that there won't be a rate hike this year, and 25% expect a rate cut in March, according to the CME FedWatch tool. This belief has once again brought back optimism in the market.
Is Fed Done Raising Rates?
Bets that the Fed is done raising rates strengthened on softer jobs data for the month of October. The Fed announced on Nov 1, 2023, that it would keep its benchmark interest rate within the range of 5.25% to 5.50%. Agreed, the central bank has left the door open for potential future actions as it continues to grapple with sticky inflation.
But bets over such hawkish steps have weakened lately on slower economic growth. CME FedWatch tool revealed that there is a 90.4% chance of the rates remaining the same in December (at the time of writing) and an 82.9% chance that the Fed will again stay put in late January.
Resilient U.S. Consumers & Holiday Season
Despite sticky inflation, U.S. consumers have been showing strong resilience. Retail sales in the United States grew 0.7% sequentially in September 2023, following an upwardly revised 0.8% uptick in August and beating forecasts of a 0.3% advance. American consumers are expected to splurge on discretionary items through the busy holiday shopping season.
The National Retail Federation (NRF) stated that consumers are estimated to shell out between $957.3 billion to $966.6 billion during November and December. Thus, spending will increase between 3% and 4% over the same period last year. The growth may be slightly lower compared to recent years, but it’s still in line with the growth rate from 2010 to 2019, when the average annual holiday outlays jumped 3.6%.
Upbeat Corporate Earnings
Better-than-expected earnings also added to the market strength. With more than 88% of the Q3 results already out, earnings growth for the quarter is on track to turn positive despite the significant Energy sector drag. This positive earnings growth in Q3 comes after three back-to-back quarters of declines.
Total earnings for the 88.2% of S&P 500 members that have reported results so far are up 1.1% from the same period last year on 1.7% higher revenues, with 81.6% beating EPS estimates and 61.7% beating revenue estimates per Earnings Trends issued on Nov 8, 2023. Earnings growth represents a notable improvement when compared to the recent quarters.
Time for Momentum ETFs?
These favorable conditions suggest that Wall Street is on the brink of a rally, presenting an opportune time to invest in Momentum ETFs. These ETFs are designed to capitalize on existing market trends by investing in stocks that have shown a tendency to continue their current trajectory. As Wall Street's optimism continues to grow, these funds are likely to yield significant returns.
ETFs in Focus
Invesco Dorsey Wright Consumer Cyclicals Momentum ETF (PEZ - Free Report) , VanEck Social Sentiment ETF (BUZZ - Free Report) , Invesco Dorsey Wright Technology Momentum ETF (PTF - Free Report) , Momentumshares US Quantitative Momementum ETF (QMOM - Free Report) , QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM - Free Report) and SPDR S&P 1500 Momentum Tilt ETF (MMTM - Free Report) advanced in the range of 16.6% to 5.8% in the past week.
Word of Caution
It is important to remember that while the signs are promising, all investments carry inherent risks. The geopolitical landscape is unpredictable, and any changes in Fed rate hopes could hamper the predicted rally.