The U.S. market is in great shape as 2019 comes to a close, thanks mainly to U.S.-China trade optimism, a dovish Fed, easing of Brexit uncertainty and dissipating global growth worries. The S&P 500, the Nasdaq and the Dow Jones are hovering around their all-time highs as the Santa rally took Wall Street in its grip (read: Bull Market Rages On: Bet Big for 2020 With These ETFs).
The S&P 500 Index is on its way to record its best year since 1997. After such astounding gains, thoughts of a correction in the market or overvaluation concerns are justified. Wall Street bears signaled earnings weakness as the main concern for 2020. “The percentage of S&P 1500 (large-, mid- and small-cap) companies with positive forward EPS growth has deteriorated meaningfully since 2018,” per Morgan Stanley analysts as quoted on MarketWatch.
Though the year 2020 should stay strong as well, the rally has high chances of slowing down. “The S&P 500 has returned an average of 6.6% in the year following a rally of 20% or more since 1928, slightly below the 7.6% return in all years”, per research from Bespoke Investment Group.
The latest stock market rally can largely be attributed to global policy easing and trade deal optimism. Notably, the combined size of the balance sheet of the Fed, BoJ and the ECB was stretched to $14.5 trillion in November 2019, up from the pre-crisis level of $4 trillion, per an article published on MarketWatch. This indicates the central banks’ limited power of further balance sheet expansion from here. On the other hand, trade deal tailwind is already priced-in at the current level.
The key U.S. ETF iShares Core S&P 500 ETF (IVV - Free Report) was available at $324.32 as of Dec 26, 2019, up 28.8% this year. Against this backdrop, we highlight a few ETFs under $20 that can prove to be good bets in 2020. These cheap ETFs can be lucrative investing options at the present sky-high pricing level.
Global X MSCI Norway ETF (NORW - Free Report) – $12.57
Norway is among the top 10 nations in terms of oil exports. Per the U.S. Energy Information Administration (EIA), Norway is the biggest oil driller in Europe. The Energy sector makes about 25.6% of the fund. With Brent crude prices gaining about 34.5% this year and poised for further upside in 2020 due to expansion of OPEC output cut, NORW should gain materially.
Goldman Sachs predicts returns of 9.1% from energy in 2020 and set the price target for Brent crude at $63. It is important to note that Norway is the only G10-country to have hiked interest rates in the recent past, indicating its economic stability (read: Commodities Up for a Solid 2020? ETFs to Benefit).
Invesco Global Clean Energy ETF (PBD - Free Report) – $14.12
Clean energy stocks have logged great performances this year and are poised to offer more returns next year.Global supplies of renewable electricity are estimated to expand 50% in the next five years. The global solar energy market is expected to witness a CAGR of 20.5% from 2019 to 2026. Solar, wind and hydropower projects are being launched at their fastest rate in four years, per IEA. The rising adoption of renewable energy will continue in 2020 too.
iShares Gold Trust (IAU - Free Report) – $14.45
The gold bullion ETF is up 16.5% this year but lost 0.4% in the fourth quarter (as of Dec 24, 2019) as investors shifted their focus toward risky asset-class equities in the latter half of the year. But we expect some moderation in the equity rally next year and the resultant uptick in gold prices. Certain uncertainty related to the presidential election in 2020 and further progress in U.S.-China trade talks may also lead to some gains in this safe-haven asset.
Global X Cloud Computing ETF (CLOU - Free Report) – $15.93
This ETF seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology. Cloud computing is highly effective as it helps firms to lower IT costs by eliminating the need for servers and related maintenance costs. This tech area has been experiencing high demand (read: WisdomTree's Cloud ETF on Deck).
Global X SuperDividend ETF (SDIV - Free Report) – $17.77
This Zacks Rank #3 fund yields as much as 8.80% annually, which makes it an enticing bet in the present low-rate era.The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. The index provider applies certain dividend stability filters (read: 5 Solid Dividend ETF & Stock Picks That Yield 5% or More).
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