Wall Street has regained momentum this week hitting new highs on vaccine hopes. Both the S&P 500 and the Nasdaq reached new record closing highs on Aug 24 as optimism over potential medical advances to fight coronavirus boosted all the three major U.S. stock indexes higher.
Not only the United States but also global markets are brimming with optimism with Japan’s Nikkei nearing pre-pandemic levels. Asian stocks reached a two-year high on vaccine and treatment hopes. Also, statements from both China and the United States that top-level trade representatives had held positive talks over the future of the Phase 1 trade deal contributed to the global market rally.
Inside the Progress in Treatment & Vaccine
On the treatment front, the U.S. Food and Drug Administration (FDA) issued an emergency use authorization for investigational convalescent plasma to treat COVID-19 in hospitalized patients. While the treatment has not yet undergone full clinical trials, the FDA feels that the“product may be effective in treating COVID-19 and that the known and potential benefits of the product outweigh the known and potential risks of the product.”
In the vaccine race, Moderna (NASDAQ:MRNA), AstraZenaca, Johnson & Johnson (NYSE:JNJ) and Pfizer (NYSE:PFE), are prominent names. The Financial Times reported that the Trump administration is considering providing "emergency use" approval of the experimental coronavirus vaccine from AstraZeneca (NYSE:AZN) and Oxford University in October.
Reopening Trade is Picking Momentum
All the update has been boosting “reopening trade.” Moreover, some economic indicators remained upbeat in the United States lately.Consumer confidence looks to be on the mend. The University of Michigan's consumer sentiment for the United States stood at 72.8 in August 2020, down from the previous month's 72.5 but above market expectations of 72.0.
Homebuilder confidence in the newly built, single-family home market also jumped to a record-high 78 in August. According to the U.S. Housing and Urban Development and Commerce Department, total housing starts rose 22.6% (the biggest gain since October 2016) to a seasonally adjusted annual rate of 1.50 million units in July. The reading surpassed analysts’ expectations of 1.24 million units, per a Reuters’ poll.
U.S. business activity touched the highest level since early 2019 this month as companies in both the manufacturing and services sectors witnessed resurgence in new orders despite high new COVID-19 cases. If the trend continues, the greenback will remain steady and gold will remain sluggish.
ETFs in Focus
Against this backdrop, below we highlight a few high-beta and high momentum ETFs that could be useful in tapping the recent upbeat mood in the market.
High Beta ETFs
Beta is directly related to market movement. Notably, high-beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high-beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.
Invesco S&P 500 High Beta Portfolio (SPHB)
This fund tracks the performance of 100 stocks from the S&P 500 index with the highest realized volatility over the past 12 months. The fund charges 25 bps in fees.
High Momentum ETFs
Momentum investing might be an intriguing idea for those seeking higher returns in a short spell.
iShares Edge MSCI USA Momentum Factor ETF (MTUM)
This ETF seeks to track the performance of large and mid-cap U.S. stocks exhibiting relatively higher momentum characteristics. The fund charges 15 bps in fees.
Invesco DWA Momentum ETF (PDP)
The fund looks to track the Dorsey Wright Technical Leaders Index and charges 62 bps in fees.
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Invesco DWA Momentum ETF (PDP): ETF Research Reports
iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
Invesco SP 500 High Beta ETF (SPHB): ETF Research Reports
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