The longest bull market in U.S. history completed its 11th anniversary. However, the bull run has been threatened by the coronavirus outbreak and oil price collapse lately that has pushed the stock market into a correction territory (read: 6 Equity ETFs Surviving the Market Correction).
In fact, the Wall Street saw the worst one-day decline on Mar 9 since the financial crisis with all the three major indices tumbling nearly 8%. Crude oil prices plunged 25% after the world's key producing countries failed to reach an output cut deal.
Is the Longest Bull Run Coming to An End?
If coronavirus continues to spread and hit global growth, it will disrupt supply chains and have a negative long-term economic impact on trade, ports, consumer spending and consumer confidence. In fact, travel and leisure companies are beginning to feel the coronavirus impact. A growing number of companies have warned that the epidemic will prevent them from meeting sales or profit targets for the first three months of the year.
The Organization for Economic Cooperation and Development said the virus has put the world economy in its most "precarious position" since the 2008 financial crisis. According to a recent analysis from MSCI, U.S. equities could fall another 11% from Mar 3 levels. Given that the stocks have already fallen more than 10% on coronavirus fears, additional double-digit declines would spell the end of the 11-year bull market (read: 11-Year Bull Market Nears an End? ETFs That Should Survive).
Despite the latest sell off, the S&P 500 Index is up 326% from the bear-market bottom of 676.53 on Mar 9, 2009. Easy monetary policies, strong corporate earnings and stock buybacks have been the biggest driver of the longest bull-market. The United States emerged as a healthier economy with GDP growth rising to 2.3% in 2019 from a contraction of 5.7% seen in March 2009. The unemployment rate has fallen to 3.5% currently from 10% in October 2009. Additionally, the housing market is experiencing a boom currently driven by lower mortgage rates and slower home price growth. Americans also have an optimistic view of the economy though the deadly virus outbreak is expected to hit sentiments in the near term.
Further, central banks across the globe are enacting financial stimulus to prop up the virus-infected economy. The Federal Reserve announced an emergency rate cut of half-percentage point to the range of 1.00-1.25%. Bank of Canada joined the Fed by cutting rates by 50 bps to 1.25%. The Bank of England announced a surprise rate cut of 50 bps cut to withstand the coronavirus shock. This is the first cut since the financial crisis. The European Commission Bank is expected to reduce its deposit rate by 10 bps later this week. The People’s Bank of China will likely drop the one-year loan prime rate to 40 bps over the rest of this year, with the next move expected on Mar 20.
Meanwhile, President Donald Trump is looking to freeze payroll taxes on workers for the rest of this year and offer some form of relief to U.S. shale producers facing significant challenges after a brutal drop in oil prices. The potential tax incentives will come on top of an $8.3 billion spending package Trump signed last week. Additionally, the White House plans to aid airlines and cruise companies, the two most hard-hit industries.
If the monetary and fiscal stimulus comes at the right time, then the stock market could thrive given that the S&P 500 is nearing a bear market. As a result, the biggest winners of the bull market will continue to see gains. Below, we have presented a bunch of five top-performing ETFs of the 11-year bull market that will continue to outperform in the coming months given that these have a Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Invesco NASDAQ Internet ETF (PNQI - Free Report) – Up 820.6%
This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 82 stocks in its basket, it has AUM of $492.2 million and trades in lower volume of about 19,000 shares a day. It charges 62 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook (read: Amid the Tech Slump, Internet ETFs Most Resilient to Virus).
iShares PHLX Semiconductor ETF (SOXX - Free Report) – Up 644.3%
This ETF targets the semiconductor corner of the broad tech space and follows the PHLX SOX Semiconductor Sector Index. It is home to 30 securities and has AUM of $2.2 billion. The fund charges investors 46 bps in annual fees and trades in solid average volume of around 554,000 shares a day. It has a Zacks ETF Rank #1 with a High risk outlook (read: Stimulus Hopes Triumph Over Virus: 5 Top ETF Picks for March).
First Trust NYSE Arca Biotechnology Index Fund (FBT - Free Report) – Up 634.5%
This fund follows the NYSE Arca Biotechnology Index, which measures the performance of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. It holds about 31 securities in its basket and charges 57 bps in annual fees. It has accumulated $1.7 billion in its asset base and trades in a moderate volume of around 166,000 shares a day. FBT has a Zacks ETF Rank #3 with a High risk outlook.
First Trust NASDAQ-100-Technology Sector Index Fund (QTEC - Free Report) – Up 622.7%
This ETF offers broad exposure to the technology sector by tracking the NASDAQ-100 Technology Sector Index. It holds 42 stocks in its basket with AUM of $2.6 billion and average daily volume of around 207,000 shares. It charges 57 bps in annual fees and has a Zacks ETF Rank #1 with a High risk outlook (read: 4 Sector ETF Winners of Bull Market Look Resilient to Virus).
iShares Expanded Tech-Software Sector ETF (IGV - Free Report) – Up 609.3%
This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 102 securities and charges 46 bps in annual fees. It is popular with AUM of $3 billion and volume is good as it exchanges nearly 681,000 shares a day. The product has a Zacks ETF Rank #1 with a High risk outlook (read: 6 Hot Top-Ranked ETFs of 2020).
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