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ETF Strategies to Ride the Wall Street Bull Run

Sweta Jaiswal, FRM

All three major U.S. bourses are scaling new highs. The Sino-US trade deal optimism and rounds of upbeat economic data are major drivers behind the upside. The S&P 500 and Nasdaq Composite rose 0.49% to 3,221.22 and 0.42% to 8,924.96, respectively, on Dec 20. Joining the rally, the Dow Jones Industrial Average rose 0.28% to a record 28,455.09 on the same day (read: S&P 500 Tops 3, 200: What Lies Ahead for ETFs in 2020?). 

Let’s take a look at the factors supporting the Wall Street momentum.

What’s Behind the Momentum?

Certain positive developments have raised optimism among investors on a solution to the trade tussle. Notably, the world’s two largest economies, the United States and China, recently agreed on a phase-one trade deal. Within the trade pact, the United States has agreed to lower its 15% tariff to 7.5% on about $120 billion worth of Chinese goods. The country has also suspended tariffs on roughly $160 billion of Chinese consumer goods, scheduled to be imposed on Dec 15. Moreover, China recently announced a reduction in tariffs on some imported products, starting 2020. It is planning to slash tariffs on 850 types of products to rates lower than most-favored-nation rates, provided the plan is approved by the State Council. The products will include some consumer goods, like frozen pork, medicines for treating asthma and diabetes, and semiconductor products.

Beijing announced a new set of tariff exemptions on Dec 19. The exemptions will be valid for a year and are expected to come into effect on Dec 26. Notably, the tariffs that have already been levied are not likely to be refunded. The latest waiver incorporates products such as metallocene high-density polyethylene and linear low-density polyethylene. Moreover, several refined oil products that include white oil and food-grade petroleum wax are included in the list. White oil is primarily used in medicinal and pharmaceutical operations. Also, it has application in cosmetics, plastic and food industries.

Meanwhile, the upbeat jobs and encouraging manufacturing updates are hinting toward a healthier economy. The upbeat U.S. homebuilders sentiment data for December has also cheered investors. The metric has scaled to the highest level since June 1999. Moreover, the data on U.S. housing starts and building permits has been encouraging (read: ETFs in Focus on Upbeat November Housing Starts Update).

ETF Strategies to Follow

Here we discus certain ETF strategies to help investors make the most of the current bull market.

Momentum ETFs

While the broader stock market is expected to gain traction on the 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 fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares Edge MSCI USA Momentum Factor ETF MTUM, Invesco DWA Momentum ETF PDP, Invesco S&P MidCap Momentum ETF XMMO, VictoryShares USAA MSCI USA Value Momentum ETF ULVM and SPDR Russell 1000 Momentum Focus ETF ONEO (read: Merry Christmas for Wall Street: Bet on These Momentum ETFs).

Growth ETFs

Growth stocks are likely to witness revenue and earnings growth at a faster rate than the industry average. As such, growth funds tend to outperform during an uptrend. While there are plenty of options in the growth ETF world, we have highlighted five funds that offer broad-based exposure to the U.S. stock market like Vanguard Growth ETF VUG, Schwab U.S. Large-Cap Growth ETF SCHG, iShares Core S&P U.S. Growth ETF IUSG, SPDR S&P 500 Growth ETF SPYG and Vanguard Mega Cap Growth ETF MGK.

Large-Cap ETFs

The current investment scenario marked by an improving U.S. economy and strengthening trade relationships seem just perfect to dive into large-cap ETFs as they perform well in such scenarios. Therefore, investors can consider SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV, Vanguard S&P 500 ETF VOO, Schwab U.S. Large-Cap ETF SCHX, iShares Russell Top 200 ETF IWL, Vanguard Mega Cap ETF MGC, Vanguard Mega Cap Growth ETF MGK and Multifactor Large Cap ETF JHML (read: Large Cap ETFs Hit All-Time High).

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SPDR Russell 1000 Momentum Focus ETF (ONEO): ETF Research Reports
 
Schwab U.S. Large-Cap Growth ETF (SCHG): ETF Research Reports
 
Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
Invesco DWA Momentum ETF (PDP): ETF Research Reports
 
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
 
iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
 
SPDR Portfolio S&P 500 Growth ETF (SPYG): ETF Research Reports
 
Vanguard Growth ETF (VUG): ETF Research Reports
 
iShares Core S&P U.S. Growth ETF (IUSG): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Schwab U.S. Large-Cap ETF (SCHX): ETF Research Reports
 
iShares Russell Top 200 ETF (IWL): ETF Research Reports
 
VictoryShares USAA MSCI USA Value Momentum ETF (ULVM): ETF Research Reports
 
United States Steel Corporation (X) : Free Stock Analysis Report
 
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