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Risk-On Sentiments Are Back: ETFs to Play

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The broader stock market is brimming with optimism. The S&P 500 Index reached new highs and FTSE All World is hovering around its 2018 record. Easing fears of trade war and global growth concerns are contributing to the equity market rally. A decent earnings season, better-than-expected U.S. GDP growth rate for the third quarter, global easy money policies and the extension of the Brexit deadline are also contributing to the global market rally.

In fact, risk-on assets are making a headway. SPDR S&P 500 ETF SPY added 5.4% in the past month (as of Nov 7, 2019), iShares MSCI ACWI ETF ACWI tacked on 5.7% gains, while the riskier iShares MSCI Emerging Markets ETF EEM gained 6.4% (read: Emerging Market ETFs Beating the Broader Market: Here's How).

Commodity prices remained steady on a favorable demand-supply scenario and a moderate greenback. Easing growth concerns favored oil investing, adding 5% gains to United States Oil Fund, LP USO. Industrial metal copper, which is a good indicator of global growth, also staged gains. iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC - Free Report) added 2.1% gains past month. Since several emerging markets are commodity-rich, rising commodity prices must have showered gains on the bourses of these countries.

Oil and stock benchmarks for the United States, Europe and emerging markets all are on their way to gain at least 10% in the same year for the first time since 2009. Currencies sensitive to global growth and trade that include the South Korean won and Australian dollar have been gaining too.

Against this backdrop, below we highlight a few ETFs that could be good buys amid renewed risk-on trade sentiments.

VanEck Vectors Biotech ETF (BBH)

The MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. The fund charges 35 bps in fees and has a Zacks ETF Rank #2 (Buy). The fund has added about 11% past month (as of Nov 7, 2019) (read: Value Biotech ETFs & Stocks to Buy Now).

iShares International Dividend Growth ETF (IGRO)

The underlying Morningstar Global ex-US Dividend Growth Index is a dividend dollars weighted index and seeks to measure the performance of international equities selected based on a consistent history of growing dividends. The fund yields 2.69% annually and added 5.8% in the past month.

Materials Select Sector SPDR Fund (XLB)

The underlying Materials Select Sector Index seeks to provide an effective representation of the materials sector of the S&P 500 Index. The fund charges 13 bps in fees. The fund has a Zacks Rank #2. The fund advanced 4.9% in the past month (read: 4 Sectors Set to Surge in November: ETFs & Stocks to Buy).

KBW High Dividend Yield Financial Invesco ETF (KBWD)

The underlying KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. The expense ratio of the fund 2.42%. It yields 8.51% annually and added about 4.7% in the past month.

Alpha Architect U.S. Quantitative Momentum ETF (QMOM)

The underlying Alpha Architect Quantitative Momentum Index uses a 5-step, quantitative, rules-based methodology to identify a portfolio of approximately 40-50 U.S. equity securities with positive momentum. The fund charges 49 bps in fees and nudged up only 0.7% past month but is gaining traction lately. On Nov 8, the fund jumped 1.4%.

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