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We are currently amidst the famous Santa Claus rally. Notably, the Santa Claus Rally refers to the jump in stock prices in the week between Christmas and New Year's Day. 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 Santa Propel Wall Street to New Heights This Year?
The U.S. stock market is approaching record highs as 2023 comes to a close. Recent inflation data indicates progress toward the Fed's 2% target, with the core Personal Consumption Expenditures Price Index showing a 3.2% increase year-over-year in November.
However, when analyzed on a six-month annualized basis, core PCE inflation was at 1.9% in November, suggesting that the Fed is close to its goal, which may lead to interest rate cuts. Recession indicators are minimal, and interest rates have decreased from their recent highs. The Dow Jones Industrial Average and S&P 500 are on the verge of reaching record levels, and the Nasdaq Composite has seen a substantial increase of over 40% this year.
Some Fed officials have attempted to counter expectations of rate cuts, but the relatively low inflation numbers have fueled expectations that rates will be cut significantly in the coming year. This expectation has supported the stock market's rally in 2023.
While AI-related hype dominated the beginning of the year, the latter half of 2023 has been characterized by concerns about interest rates. An autumn decline in the stock market coincided with a surge in Treasury yields, but recent data and Fed forecasts have alleviated many of these concerns, per Yahoo Finance.
Looking ahead to 2024, forecasts have already been adjusted to reflect expectations of easing inflation, continued economic growth, and rate cuts by the Fed. A "soft landing" scenario has become the consensus, driving the market higher as the year concludes. All these factors should materialize a solid Santa rally this year.
ETFs to Tap
Below we highlight a few ETFs that have a Zacks Rank #1 (Strong Buy), Price as a % of 52-week High-Low range is greater than 90% (meaning they are hovering around an one-year high), P/E less than 26.57X (which is the current P/E of S&P 500) and a beta greater than one.
The underlying S&P MidCap 400 Value Index measures the performance of the mid-capitalization value sector of the U.S. equity market. It is a subset of the S&P MidCap 400 and consists of those stocks in the S&P MidCap 400 exhibiting the strongest value characteristics.
The underlying Consumer Discretionary Select Sector Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index..
The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment.
Price as a % of 52-week High-Low range: 98.94%
P/E: 25.87X
Beta: 1.33X
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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5 Top-Ranked ETFs to Tap Amid Ongoing Santa Rally
We are currently amidst the famous Santa Claus rally. Notably, the Santa Claus Rally refers to the jump in stock prices in the week between Christmas and New Year's Day. 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 Santa Propel Wall Street to New Heights This Year?
The U.S. stock market is approaching record highs as 2023 comes to a close. Recent inflation data indicates progress toward the Fed's 2% target, with the core Personal Consumption Expenditures Price Index showing a 3.2% increase year-over-year in November.
However, when analyzed on a six-month annualized basis, core PCE inflation was at 1.9% in November, suggesting that the Fed is close to its goal, which may lead to interest rate cuts. Recession indicators are minimal, and interest rates have decreased from their recent highs. The Dow Jones Industrial Average and S&P 500 are on the verge of reaching record levels, and the Nasdaq Composite has seen a substantial increase of over 40% this year.
Some Fed officials have attempted to counter expectations of rate cuts, but the relatively low inflation numbers have fueled expectations that rates will be cut significantly in the coming year. This expectation has supported the stock market's rally in 2023.
While AI-related hype dominated the beginning of the year, the latter half of 2023 has been characterized by concerns about interest rates. An autumn decline in the stock market coincided with a surge in Treasury yields, but recent data and Fed forecasts have alleviated many of these concerns, per Yahoo Finance.
Looking ahead to 2024, forecasts have already been adjusted to reflect expectations of easing inflation, continued economic growth, and rate cuts by the Fed. A "soft landing" scenario has become the consensus, driving the market higher as the year concludes. All these factors should materialize a solid Santa rally this year.
ETFs to Tap
Below we highlight a few ETFs that have a Zacks Rank #1 (Strong Buy), Price as a % of 52-week High-Low range is greater than 90% (meaning they are hovering around an one-year high), P/E less than 26.57X (which is the current P/E of S&P 500) and a beta greater than one.
iShares S&P Mid-Cap 400 Value ETF (IJJ - Free Report)
The underlying S&P MidCap 400 Value Index measures the performance of the mid-capitalization value sector of the U.S. equity market. It is a subset of the S&P MidCap 400 and consists of those stocks in the S&P MidCap 400 exhibiting the strongest value characteristics.
Price as a % of 52-week High-Low range: 91.19%
P/E: 12.23X
Beta: 1.18X
Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report)
The underlying Consumer Discretionary Select Sector Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index..
Price as a % of 52-week High-Low range: 96.50%
P/E: 24.29X
Beta: 1.19X
Financial Select Sector SPDR ETF (XLF - Free Report)
The underlying Financial Select Sector Index seeks to provide an effective representation of the financial sector of the S&P 500 Index.
Price as a % of 52-week High-Low range: 96.51%
P/E: 14.40X
Beta: 1.08X
iShares Russell 2000 Value ETF (IWN - Free Report)
The underlying Russell 2000 Value Index measures the performance of the small-capitalization value sector of the U.S. equity market.
Price as a % of 52-week High-Low range: 97.04%
P/E: 7.87X
Beta: 1.16X
VanEck Semiconductor ETF (SMH - Free Report)
The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment.
Price as a % of 52-week High-Low range: 98.94%
P/E: 25.87X
Beta: 1.33X
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)