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Market Rallies: High-Beta & Momentum ETFs to Buy

Sanghamitra Saha

U.S. stocks seem to have shrugged off all uncertainties regarding nagging trade tensions between the United States and China. The one-month-long trade tantrums of the United States (first with China and then with Mexico) have eased as Fed Chair Powell hinted a possible rate cut to keep economic expansion going.

Like several analysts and economists, we too believe that the U.S.-China tariff battle is a threat to the American economy as it could hurt manufacturers and consumers. Against this worrisome environment, central bank’s likely intervention came as a relief to investors.

At the current level, according to CME FedWatch tool, there is a 42.2% chance of a 50-bp rate cut in the Sep 18 meeting, followed by a 38.4% probability of 25-bp rate cut, 9.9% likelihood of a 75-bp rate cut and only 9.6% probability of a no-rate-cut scenario.

Thanks to rate cut hopes, the key U.S. indexes have been on rallying mode since past three days. The Nasdaq which slipped into a correction zone to start the month, also recoiled swiftly.

Also, reportedly, Washington could defer trade tariffs on Mexico and there are cues of extension of output cut by OPEC and other producers. Moreover, Trump said that he would decide whether to slap China with further tariffs on at least $300 billion in goods only after the G-20 meeting which is scheduled later this month. Though signs of an improvement in trade tension are feeble, there is a ray of hope at the current level.

Why High-Beta & Momentum Investing Is Intriguing Now

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

The underlying S&P 500 High Beta Index consists of 100 stocks from the S&P 500 index with the highest sensitivity to market movements, or beta, 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.It looks to reflect profits from buying stocks that are sizzling on the market.

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 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 (read: Dovish Fed Minutes Should Boost These ETFs).

Invesco DWA Momentum ETF PDP

The fund looks to track the Dorsey Wright Technical Leaders Index. The fund charges 63 bps in fees.

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Invesco DWA Momentum ETF (PDP): ETF Research Reports
 
Invesco S&P 500 High Beta ETF (SPHB): ETF Research Reports
 
Fidelity Momentum Factor ETF (FDMO): ETF Research Reports
 
iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
 
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