Historically, December is the best month for stocks as the S&P 500 has offered 1.54% on average with 50 years of positive returns since 1950, as per moneychimp.com. Every year, traditional investors pin their hopes on the Santa Clause rally. This time, the Christmas month is likely to be merrier for the market on strong hopes of tax reform and upbeat consumer sentiment.
However, there could be one glitch in the end-of-season rally, in the form of the third Fed rate hike. This may cause the market to stagnate. Though investors seem to have digested the move by now, a certain selloff is likely post hike.
Plus, renewed tensions with North Korea related to nuke war is another dampener. Given this, investors must be interested in finding out all possible ETFs to win over the unseen or cash in on some inevitable euphoria. For them, below we have highlighted a few ETFs.
SPDR S&P Bank ETF KBE
Hopes of deregulation in the upcoming Fed chairmanship of Powell and a likely rising rate environment amid monetary policy tightening, financial stocks and ETFs like KBE should perform well in December.
US Tax Reform
The month of November witnessed considerable progress on tax reform with movement from both Senate and House. While House Republicans approved the tax plan in a 227-205 vote, Senate leaders convinced likely opponents with a host of “deals to resolve their concerns” at the end of the month. The fund TAXR gained about 4.1% in the last one month (as of Nov 29, 2017) and is likely to score higher this month too as the U.S. Senate passed a tax bill in early December (read: ETF Stories of November: All About Retail, OPEC and Tax Cuts).
Amplify Online Retail ETF IBUY
We are in the midst of the holiday season. The holiday season make up about 20 to 40% of annual sales for many retailers. Already, Thanksgiving, Black Friday and Cyber Monday have seen a splurge in buying. Adobe predicts that “this will be the first-ever holiday season to break $100 billion in online sales.” This makes IBUY an intriguing pick.
iShares PHLX Semiconductor ETF SOXX
By now, the monster rally of bitcoin is known to all. Lately, the cryptocurrency breached the $11,000 mark. Now, mining of cryptocurrencies needs the usage of semiconductors. A hardware known as an ASIC (Application-Specific Integrated Circuit) has been designed exclusively for mining bitcoin. This where semiconductor ETFs like SOXX can gain traction (read: Here's Why Semiconductor ETFs Could Continue Their Rally).
iShares U.S. Aerospace & Defense ETF ITA
North Korea recently cautioned that a "reckless" combined military drill by the United States and South Korea may result in a nuclear war. This very comment kept the broader market at check at early December. However, this rhetoric could boost aerospace and defense ETFs like ITA. In addition, Trump’s new defense strategy for Afghanistan, rise of cyber security threats as well as sporadic attacks on European nations continued to boost U.S. Defense stocks (read: Trump Policies and North Korea Aid Aerospace & Defense ETFs).
iShares Edge MSCI Min Vol Global ETF ACWV
Thanks to geopolitical tensions, investors should a keep a low volatile global ETF like ACWV in their portfolios for safety.
Vanguard S&P Mid-Cap 400 Growth ETF IVOG
While large companies are normally known for stability and the smaller ones for growth, mid-caps offer the best of both the worlds, allowing growth and stability in portfolios simultaneously. These middle-of-road securities are arguably safer options and have the potential to move higher in turbulent times, especially if geopolitical issues crawl into the picture. Since the U.S. economy is on the right track but global economy may waver due to North Korea-related tensions, this mid-cap growth ETF should be a good pick.
iShares India 50 ETF INDY
The Indian economy is back on track as it has emerged from the short-term adverse impact of the goods and services tax and remaining after-effects of demonetization (effected a year ago). The economy grew 6.3% in the July-September period, in line with market estimates, but higher than the three-year low growth of 5.7% scored in the April-June quarter. Investors who want to dip their toes in this new-found optimism, may play this fund.
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