Play Momentum ETFs as U.S. Strikes a Debt Deal
As the month draws to a close, Wall Street as well as global markets appear ready to rally. The positive shift is primarily fueled by an agreement on debt ceiling and encouraging Q1 results, falling inflation and an AI frenzy.
U.S. Debt Deal Done
President Joe Biden and House Speaker Kevin McCarthy last week reached a tentative agreement that aims to lift the nation's borrowing limit for two years, preventing a possible U.S. debt default. This deal gives much-needed relief to politicians and markets, removing the threat of economic upheaval that looms every time the debt ceiling needs to be renegotiated. However, the duo must now navigate the deal into law before Jun 5, the date when Treasury Secretary Janet Yellen warns the government could exhaust its resources.
FAANG Is Back, So Are Chip Stocks
FAANG stocks have been on a rallying mode. Netflix (NFLX), Apple (AAPL), Alphabet (GOOGL), Meta (META), Microsoft (MSFT) and Nvidia (NVDA) all finished at their highest levels in at least a year. The strength of AI, corporate restructuring through layoffs, a moderation in interest rates and cooling inflation are helping FAANG stocks to bounce back after a struggling 2022.
Most recently, blockbuster first-quarter fiscal 2024 earnings from Nvidia (NVDA) led to bullishness across the AI space and chip sector, fueling a rally in the stocks (read: Tech ETFs Burning Hot on AI-Fueled Nvidia Surge).
Notably, Information Technology takes about 27.64% of the S&P 500 while the sector occupies about 60% of the Nasdaq-100. Hence, a tech rally is sure to send these key equity gauges higher.
Healthy Consumer in America
In the face of ambiguity, American consumers are demonstrating tenacity, a trend visible in Walmart's sturdy quarterly performance. U.S. Personal Saving Rate is at 4.10% compared to 4.50% last month and 3.60% last year.
Time for Momentum ETFs?
These favorable conditions suggest that Wall Street is on the brink of a rally, presenting an opportune time to invest in Momentum ETFs. These ETFs are designed to capitalize on existing market trends by investing in stocks that have shown a tendency to continue their current trajectory. As Wall Street's optimism continues to grow, these funds are likely to yield significant returns. In fact, Wall Street rally is likely to have a spillover effect on the entire global markets.
ETFs in Focus
iShares MSCI USA Momentum Factor ETF (MTUM)
iShares MSCI Intl Momentum Factor ETF (IMTM)
Invesco S&P MidCap Momentum ETF (XMMO)
Invesco DWA Momentum ETF (PDP)
Invesco S&P SmallCap Value with Momentum ETF (XSVM)
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iShares MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
iShares MSCI Intl Momentum Factor ETF (IMTM): ETF Research Reports
Invesco DWA Momentum ETF (PDP): ETF Research Reports
Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports
Invesco S&P SmallCap Value with Momentum ETF (XSVM): ETF Research Reports
