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Momentum ETFs to Buy as US-China Adopt Peacemaking Tone

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The month of August has witnessed neck-snapping volatility in US-China trade ties. While the month started on a hostile note, the end seems to be quite assuaging (at least for now). Let’s see what has happened so far in the month on the trade front.

Ups and Downs in the US-China Trade Ties

The month was mostly about tit-for-tat tariffs between the superpowers — the United States and China. China levied a round of retaliatory tariffs on U.S. goods worth $75 billion in the range of 5% to 10%, which is set to be enacted on Sep 1. The move by China came after the U.S. government announced on Aug 1 that it is levying a 10% tariff on $300 billion worth of Chinese goods. Though Washington delayed some of those tariffs on Aug 13, saying it will be enacted in two tranches, on Sep 1 and Dec 15, the announcement prompted China to retaliate (read: Worst Sector ETFs of August).

After U.S. markets closed on Aug 23, Trump said, “he would raise tariffs on $250 billion in Chinese exports to 30% from 25% in October, and that the tariffs kicking in next week will now be 15%, rather than 10%.” The first lot of those tariffs will be introduced in September (read: Consumer ETFs in Focus on Fresh Tariff Threats).

However, signs of abating tensions were noticed at the end of the month with China saying it won’t immediately react to the latest U.S. tariff increases. China is also mulling over a meeting with American representatives in September. All these caused a lot of volatility in the market.VelocityShares 1x Long VSTOXX Futures ETN EVIX has gained about 24.2% in the past month (read: Top and Flop ETF Areas of August).

Markets Charged-Up

No wonder, markets are hyped up on possibilities of reconciliation. “U.S.-China relations have been volatile recently, but for now there is a sense that things are heading in the right direction, and that has coaxed some traders back into the market,” said David Madden, market analyst at CMC Markets UK, as quoted on MarketWatch.

Dow Jones Industrial Average gained 326.15 points on Aug 30. Overall, SPDR S&P 500 ETF SPY and SPDR Dow Jones Industrial Average ETF (DIA - Free Report) added about 1.3% each and Invesco QQQ Trust QQQ gained more than 1.5%.

Against this backdrop, momentum investing might be an intriguing idea for those seeking higher returns in a short spell.

iShares Edge MSCI USA Momentum Factor ETF (MTUM)

The underlying MSCI USA Momentum Index measures the performance of U.S. large and mid-capitalization stocks exhibiting relatively higher momentum characteristics. The fund charges 15 bps in fees.

Invesco DWA Momentum ETF (PDP)

The underlying Dorsey Wright Technical Leaders Index includes approximately 100 U.S.-listed companies that demonstrate powerful relative strength characteristics and constructed pursuant to Dorsey Wright proprietary methodology. The fund charges 63 bps in fees.

JPMorgan U.S. Momentum Factor ETF (JMOM)

The JP Morgan US Momentum Factor Index is comprised of U.S. equity securities selected to represent positive momentum factor characteristics. The fund charges 12 bps in fees.

First Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)

The underlying Dorsey Wright Momentum Plus Low Volatility Index seeks to track the overall performance of 50 stocks within the NASDAQ US Large Mid Cap Index that exhibit the lowest levels of volatility while maintaining high levels of relative strength. The fund charges 60 bps in fees.

Aptus Behavioral Momentum ETF (BEMO)

The underlying Aptus Behavioral Momentum Index tracks the performance of 25 large US-traded equity securities. It quantitatively ranks large U.S. companies based on a combination of momentum and irrational investor behavior and seeks to gain exposure to only the highest ranked stocks. The fund charges 79 bps in fees.

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