U.S. Markets open in 7 hrs 44 mins

Is This the Right Week to Play Growth ETFs?

Sanghamitra Saha
South Korea's GDP increases in the first quarter on strong exports and investments.

We are in the middle of the Thanksgiving Week, which is known for stock market buoyancy. As per an article published on CNBC.com, the S&P 500 was up 75% of the time with an average gain of 0.6% since 1945 in the Thanksgiving week.

This week was no exception with Wall Street’s key indexes – the S&P 500, the Dow and the Nasdaq – at records on Nov 21, 2017. In any case, Thanksgiving marks the start of the one-month long holiday season. So, euphoria related to holiday sales should help the key equity gauges to rip higher.

The week will see the great Black Friday sale. Last year, the average shopper shelled out $900 on this discount day. Needless to say, the day causes investors to lean toward retail stocks. However, around half of Thanksgiving weekend shopping will likely be done via online, as per the NRF. And around 36% of shoppers will likely purchase things on sale on Black Friday, according to the source.

This along with the likely passage of Trump’s tax cut bill will add more enthusiasm in the stock market. Goldman believes that there is an 80% possibility of the enactment of tax reform early next year. The house also believes that the S&P 500 earnings may shoot up 14% in 2018 if the tax reform is passed.

Meanwhile, job, retail and housing data came in decent, adding to the further optimism. Existing home sales surged in October to a level not seen since summer. As far as Fed policy tightening is concerned, the current level of benchmark treasury bond yields is not concerning, if we go by Credit Suisse’ analysis. As per Credit Suisse, “P/Es have historically moved higher until the 10-year Treasury reaches 5%.”

However, their research also indicated that this “tipping point” has probably declined to 3 1⁄2%, given the ongoing slower-growth environment. Whatever the case, with the 10-year benchmark bond yields is 2.36% (on Nov 21, 2017). This means a trend of rising P/E can be expected.

All these factors call for growth ETF investing as the undercurrent of the market behavior is pretty positive. Below we highlight a few ETFs that gained substantially in the five days and can keep up the strong momentum.

ARK Innovation ETF ARKK

The ARK Innovation ETF seeks long-term growth of capital. “Securities within ARKK are expected to focus on and benefit from the development of new products or services, technological improvements and advancements in scientific research related to, among other things disruptive innovation across ARK’s three themes: Web x.0 (Next Generation Internet), Industrial Innovation, and Genomic Revolution,” as per the issuer (read: 4 Reasons Why Investors Love Passive ETFs).

Innovator IBD 50 Fund FFTY

The underlying index of the fund – the IBD 50 index is a weekly, rules-based, computer-generated stock index that seeks to identify the current top 50 growth stocks. The fund charges 80 bps in fees (read: 5 Biggest ETF Winners of Trump Trade Resurgence).

Principal Millennials Index ETF GENY

The fund looks to track the NASDAQ Global Millennial Opportunity Index. It charges 45 bps in fees. Consumer cyclical (46.3%) and technology (35.3%) are the top two sectors of the fund.

ProShares Ultra Consumer Services UCC

The underlying Dow Jones U.S. Consumer Services Index measures the performance of consumer spending in the services industry of the U.S. equity market. The fund charges 95 bps in fees.

Guggenheim S&P 600 Small-Cap Pure Growth RZG

The fund looks to track the S&P SmallCap 600 Pure Growth Index. S&P SmallCap 600 companies with strong growth characteristics are the holdings of the fund.

iShares Core Dividend Growth ETF DGRO

The fund looks to track the investment results of an index composed of U.S. equities with a history of consistently growing dividends (read: ETFs to Benefit from Trump Tax Plan).  

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ISHRS-CORE DG (DGRO): ETF Research Reports
 
GUGG-SP 600 PG (RZG): ETF Research Reports
 
ARK-INNOVATION (ARKK): ETF Research Reports
 
PRO-ULT CONS SV (UCC): ETF Research Reports
 
PRIN-MILLNLS (GENY): ETF Research Reports
 
INNOVATOR IBD (FFTY): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report