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Bet on These Momentum ETFs to Gain From Wall Street's Rally

Sweta Jaiswal, FRM

All three major U.S. bourses are scaling new highs. The S&P 500 Index has rallied 29.2% in the year-to-date period. Moreover, NASDAQ composite and Dow Jones Industrial Average have jumped 36% and 22.7%, respectively, in the same time frame. The probabilities of signing the Sino-US phase-one trade deal in early January 2020 significantly buoyed optimism among investors in December. The broader market uptrend should not show any signs of slowing down, at least in early 2020 (read: ETF Strategies to Ride the Wall Street Bull Run).

Meanwhile, Nasdaq composite crossed the 9000 mark on Dec 26. The gains were largely due to the e-commerce giant Amazon’s AMZN announcement of witnessing a record-setting holiday shopping season. Per a Mastercard SpendingPulse survey, holiday sales inched up 3.4% year over year.

Certain positive developments raised investors’ hopes about a solution to the trade tussle. Meanwhile, the upbeat jobs and encouraging manufacturing updates are hinting at a healthier economy. The bullish U.S. homebuilders’ sentiment data for December also perked up investors’ mood. In fact, all three major U.S. bourses are climbing new highs. The broader market rally should not show any signs of deceleration, at least early next year (read: ETFs in Focus on Upbeat November Housing Starts Update).

After three rate cuts in 2019, the Federal Reserve put a hold on its interest rate policy on Dec 11. The lower interest rates are rousing the equity markets. Moreover, the Fed gave an inkling about keeping interest rates unaltered next year unless there is any sea change in the economic outlook. The central bank kept the benchmark interest rates within the 1.50-1.75% band.

Momentum ETFs in Focus

While the broader stock market is expected to gain traction from positive developments in trade talks, momentum investing will likely take center stage as investors seek greater returns in the short term. Momentum investing looks to reap profits from hot stocks that have shown an uptrend over the past few weeks or months. Here we present five ETFs that could outperform the broader market returns in months ahead if the optimism prevails.

iShares Edge MSCI USA Momentum Factor ETF MTUM — up 25.4% year to date

This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum Index. It charges 15 bps in fees per year and is a popular choice with AUM of $9.36 billion (read: Trade Deal Optimism Fuels Santa Rally: ETFs & Stocks to Bet On).

Invesco DWA Momentum ETF PDP — up 33%

This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.76 billion in its asset base and charges 62 bps in annual fees (read: Merry Christmas for Wall Street: Bet on These Momentum ETFs).

Invesco S&P MidCap Momentum ETF XMMO — up 36%

This ETF follows the S&P Midcap 400 Momentum Index, designed to identify mid-cap firms with the highest momentum scores. XMMO has an AUM of $629.8 million and an expense ratio of 0.39%.

VictoryShares USAA MSCI USA Value Momentum ETF ULVM — up 19.4%

This fund tracks the MSCI USA Select Value Momentum Blend Index, offering exposure to large and mid-cap companies with higher exposure to value and momentum factors while also maintaining a moderate turnover and lower realized volatility compared with the traditional capitalization weighted indices. It accumulated $519 million in AUM and charges 0.2% in expense ratio.

SPDR Russell 1000 Momentum Focus ETF ONEO — up 24.9%

With AUM of $358.5 million, this product targets large-cap securities with a combination of core factors (high value, high quality and low size characteristics) and a focus factor comprising high momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index and charges an annual fee of 20 bps (read: ETF Strategies to Follow as Sino-US Trade Deal Looks Possible).

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
 
Invesco DWA Momentum ETF (PDP): ETF Research Reports
 
SPDR Russell 1000 Momentum Focus ETF (ONEO): ETF Research Reports
 
VictoryShares USAA MSCI USA Value Momentum ETF (ULVM): ETF Research Reports
 
Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports
 
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