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High Beta and Momentum ETFs to Buy on High Hopes

Sanghamitra Saha

Wall Street showed the power of hope on March 1, 2017. It was just the hope of fiscal reflation that further strengthened an already charged-up market. The U.S. market crushed all fears of the bubble and helped the Dow Jones Industrial Average to cross the 21,000 mark after Trump’s promises in his first address to the Congress (read: Trump Sets Bullish Tone: Grab These Top-Ranked ETFs).

The blue-chip index gained about 1.46% on March 1 while the S&P 500 and the Nasdaq Composite advanced about 1.37% and 1.35%, respectively. Carrying the same old bullish tone, Trump reinforced his vows of ‘massive’ tax cuts, $1 trillion of infrastructure spending, $54 billion of defense budget increase, job creation and easing regulations. Meanwhile, the most-feared part of Trump administration – a tone of protectionism – seems to ebbing gradually.

What else do investors need? All these promises led investors to bet on the Trump rally with renewed vigor. As per Reuters, nearly 8.1 billion shares changed hands on U.S. exchanges, the highest this year and way above 6.9 billion of daily average volume for the past 20 trading days.

Nonetheless, it is hard to deny the big bubble that is being created. The S&P 500 is currently trading close to 18 times the expected earnings, against its 10-year average of 14 times (as per Reuters). But on March 1, fears of stretched valuation lost and hopes won. In fact, investor optimism touched a 30-year high (read: 5 Alternative ETFs to Avoid 'Cognitive Dissonance' in Market).

In any case, the current bull market is to enjoy its eighth anniversary on March 9. Recently, Bank of America Merrill Lynch upgraded its forecast for the S&P 500 to 2,450, up from 2,300, though the strategist estimates that the S&P should currently be at 2,230. But the bank upped its target to reflect “the increasing likelihood that we are entering a typical end-of-bull-market rally, where fundamentals take a back seat to sentiment and technical.”

All in all, investors can definitely cash in on these high hopes and positive sentiments. Targeting high beta and high momentum ETFs could prove to be great tools in this regard. Below we highlight a few high beta and momentum ETFs that may find a place on investors’ wish list.

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.

PowerShares S&P 500 High Beta Portfolio SPHB

This fund tracks the performance of about 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.

Elkhorn Lunt Low Vol/High Beta Tactical ETF LVHB

The fund is based on the Lunt Capital US Large Cap Equity Rotation Index, which looks to switch between low-volatility and high-beta stocks in the S&P 500. The strategy seeks to capture alpha created by the wide dispersion between low volatility and high beta stocks. The fund charges 49 bps in fees.

High Momentum ETFs

Momentum investing might be an intriguing idea for those seeking higher returns in a short spell. It looks to reflect profits from buying stocks that are sizzling on the market (read: Trump Tax Talk Boosts Market: Time for Momentum ETFs?).

Fidelity Momentum Factor ETF FDMO

The Fidelity U.S. Momentum Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that exhibit positive momentum signals. It charges 29 bps in fees.

iShares 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.

PowerShares DWA Momentum ETF PDP

The fund looks to track the Dorsey Wright Technical Leaders Index. It includes about 100 U.S. companies from the NASDAQ US Benchmark Index. The fund charges 64 bps in fees.

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ISHRS-MSCI US M (MTUM): ETF Research Reports
FID-MOM FACTOR (FDMO): ETF Research Reports
POWERSH-SP5 HBP (SPHB): ETF Research Reports
PWRSH-DWA MO PO (PDP): ETF Research Reports
ELKHN-LUNT LVHB (LVHB): ETF Research Reports
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