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Bet on These Momentum & High-Beta ETFs on Delay in Tariffs

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After a tumultuous start to August, Wall Street has finally found some respite. On Aug 13, President Trump backed off from his plans to levy a 10% tariff on an additional $300 billion of Chinese imports. The new tariffs, which covered a host of consumer products, were scheduled to go into effect on Sep 1.

But Trump delayed duties on many Chinese imports, including cellphones, laptops and other consumer goods, fearing an effect on U.S. holiday sales. The United States Trade Representative office noted that new tariffs on certain consumer items would be held off until Dec 15.

The news was strong enough to drive the market. SPDR S&P 500 ETF SPY and SPDR Dow Jones Industrial Average ETF (DIA - Free Report) added 1.5% each and the Nasdaq-oriented fund Invesco QQQ Trust (QQQ) gained about 2.2% on Aug 13.

Plus, the U.S. economy has been on the strong footing. The economy grew an annualized 2.1% in the second quarter of 2019, breezing past expectations of 1.8%. Job market has been solid and the inflation outlook perked up in July. Consumer confidence is also near an 18-year high. American consumer confidence bounced back to 135.7 in July, marking the highest level since November 2018. The index is now near an 18-year high of 137.9 set last October (read: US Q2 GDP Growth Slows But Beats Estimates: ETF Areas to Win).

The delay in additional tariffs “is an incrementally positive sign,” Goldman Sachs Group Inc. chief economist Jan Hatzius. The economist indicated that “it suggests that the disruption in financial markets over the last several days could have led to a softening of the White House position,” quoted on Bloomberg.

In this regard, investors can join the new-found optimism in the market and play high beta and momentum ETFs as long as the trend is alive.

High Beta ETFs

Beta is directly related to market movement. Notably, high beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.

Invesco S&P 500 High Beta Portfolio (SPHB) – Up 1.9%

This fund tracks the performance of 100 stocks from the S&P 500 index with the highest realized volatility over the past 12 months. The fund charges 25 bps in fees.

High Momentum ETFs

Momentum investing might be an intriguing idea for those seeking higher returns in a short spell.

Fidelity Momentum Factor ETF (FDMO) – Up 1.3%

The Fidelity U.S. Momentum Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that “exhibit positive momentum signals.” It charges 29 bps in fees.

iShares Edge MSCI USA Momentum Factor ETF (MTUM) – Up 1.5%

This ETF seeks to track the performance of large and mid-cap U.S. stocks exhibiting relatively higher momentum characteristics. The fund charges 15 bps in fees.

Invesco DWA Momentum ETF (PDP) – Up 1.5%

The fund looks to track the Dorsey Wright Technical Leaders Index. The fund charges 63 bps in fees.

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