Back to top

Image: Bigstock

5 ETFs for January

Read MoreHide Full Article

The broader market kicked off 2020 on an upbeat note after a smashing end to 2019. Both the S&P 500 and the Nasdaq posted their best numbers in a year since 2013. Also, the Dow Jones {although debilitated by Boeing’s BA weakness caused by 737 MAX crisis} marked its best year since 2017 (read: Wall Street to See Best Year Since 2013: Will ETF Rally Last?).

Factors that drove 2019 rally were the three Fed rate cuts, a massive global policy easing in the second half, announcement of the phase-one U.S.-China trade deal after almost two years of dispute, a deal on USMCA and the fading of Brexit uncertainty (read: Fed to Not Hike Rates in 2020: ETF Areas to Shine).

Against this backdrop, let’s take a look at what lies ahead for January this new year. January is traditionally a decent month for stocks. According to, a consensus carried out from 1950 to 2019 showed that January ended up offering positive returns in 42 years and negative returns in 28 years with the average return being a positive 0.98%. The average return is moderate when compared to some other strong months of the year.

Below we highlight a few ETFs that can be intriguing bets for the current month.

SPDR Dow Jones Industrial Average ETF (DIA - Free Report)

The Dow Jones industrial average has been up 27.3% in the past year (as of Jan 2, 2020), courtesy of a dovish Fed and cues of improvement in the Sino-U.S. trade relation. However, this blue-chip index lagged the S&P 500 (up 33.1% in the past year). With Boeing shares gaining ground on the resignation of its CEO, the Dow Jones may see a catch-up trade in 2020. A stable oil price scenario is another positive for this Zacks Rank #1 (Strong Buy) fund(read: Can Dow ETFs Be a Winner in 2020?).

Schwab U.S. Small-Cap ETF SCHA

Small-cap securities have historically proven their outperformances in January. “The January Effect is theorized to occur when investors sell winners to incur year-end capital gains taxes in December and use those funds to speculate on weaker performers,” per Investopedia. Small-cap stocks that lagged large caps in major part of 2019 are poised for a rebound now as the domestic economy is in good shape and the pint-sized stocks are closely-related to the health of the domestic economy. The fund sports a Zacks Rank of 1 (read: Top-Ranked Small-Cap ETFs to Buy for 2020).

Vanguard Mega Cap Growth ETF MGK

Receding global growth fears and liquidity-led rally in the global market on the back of immense policy easing should boost growth of the world economy. Business spending and manufacturing should shoot up once the U.S.-China trade deal and Brexit agreement get through. As a result, this Zacks #1 Ranked fund can be a good pick for January (read: Nasdaq Hits 9,000 for the First Time: ETFs to Benefit).

United States Brent Oil Fund LP BNO

Oil prices made a sharp comeback in 2019, having logged the highest yearly gains in three years. The deeper production cuts from OPEC and its allies on Dec 5 through the first quarter of 2020 should result in a spike in oil prices and help energy ETFs. The flare-up in geopolitical tension in the Middle East at the start of the year is another boon for the oil ETFs (read: Top-Performing Energy ETFs & Stocks of 2019).

ProShares Online Retail ETF ONLN

This holiday season emerged as one of the best with e-commerce bonanza. Per MasterCard Advisors' SpendingPulse, e-commerce sales bumped up 18.8% year over year, representing 14.6% of total retail sales. The growth is more than five times greater than overall holiday sales growth of 3.4%(read: Shop Online ETFs & Stocks for Black Friday & Beyond).

With the cold and frosty month likely to keep many consumers indoors and shop online, it’s better to play ONLN now than offline retail ETFs.

Want key ETF info delivered straight to your inbox?

Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

SPDR-DJ IND AVG (DIA) - free report >>