Tag: Momentum

Here’s Why it is the Right Time to Invest in Momentum ETFs

Wall Street has seen a lot of turbulences in 2020 so far and Nov 3 elections are just adding to the uncertainties. However, there have been bright spots, for instance, a spectacular August for the Dow and the S&P 500 since 1984 and 1986, respectively. Also, positive developments with respect to the coronavirus vaccine, Fed’s support, U.S. fiscal stimulus and a rebounding U.S. economy with an improving job market have kept investors’ optimistic amid the crisis.

Meanwhile, market participants have been increasingly worried about a spike in new coronavirus cases in several countries in Europe and some U.S. states, lack of vaccine or a line of treatment for coronavirus and uncertainty regarding a fresh round of fiscal stimulus from the U.S. government. Moreover, Trump testing positive for coronavirus shook markets and made investors increasingly apprehensive. However, Trump’s improving health condition and his return to the White house from the Walter Reed National Military Medical Center have calmed investors to an extent.

In the current situation, analysts believe that the market’s worst is largely over as negative estimates have already been factored into the valuations. Moreover, despite the lack of a second round of stimulus package amid an aggravating coronavirus outbreak, the economy is still growing, though at a slow pace.

Given the current scenario, investors are desperately looking for opportunities for their portfolios that can help them gain despite the political and health uncertainties. Against this backdrop, let’s look at some factors that are favoring investment in the momentum ETFs:

Reduced Election Uncertainty

Following the first of the three presidential debates in Cleveland, things seem to be in favor of Mr. Joe Biden. According to data from Smarkets, Biden’s chances of winning are now pegged at 62%, while odds in favor of Trump are at 38%, per a Yahoo Finance

…

Will October Regain Momentum After Worst September Since 2011?

Wall Street’s five-month-long rally has halted in September, the historically worst-performing month in Wall Street. But this year it was more than that as all the three major stock indexes —  the Dow, the S&P 500 and the Nasdaq Composite — tumbled 2.3%, 3.9% and 5.2%, respectively, to record their worst September since 2011.

At present, economists and financial experts are busy assessing how October will behave — will it see the continuation of a downturn and almost day-to-day fluctuations or will the month turn the wheel and put the market back in a northbound trajectory? Although no clear-cut inference can be drawn at this stage, several important factors, both negative and positive, for October are clearly visible. Let’s discuss these in detail.

Sources of September’s Volatility Persist

The factors that led to severe volatility last month are present in October too. A spike in new coronavirus cases, lack of a vaccine for COVID-19, uncertainty about the second round of fiscal stimulus despite repeated warning from the Fed and several economists, and intensifying geo-political conflict between the United States and China are all present in October.

Moreover, this is the month before the U.S. presidential election scheduled on Nov 3. Historically, stock markets have remained volatile in the month before the election. Market participants generally choose to hold cash instead of investing in risky assets like equities while assessing the economic and financial consequences of the election result.

This is evident from the COBE VIX reading  — popularly known as the best fear-gauge of Wall Street. The VIX indicates market’s expectation of a 30-day forward-looking volatility based on the near-term S&P 500 Index options (both puts and calls).

Notably, VIX is currently hovering in the range of 25 to 30 while it was in the range of 21 to 23

…

5 Momentum Picks for October That Survived September Turmoil

Wall Street’s more than five-month-long bull run suffered a setback in September. Month to date, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are down 3%, 4.2% and 5.6%, respectively.

Wall Street is expected to continue fluctuating in the near future primarily due to a spike in new coronavirus cases in several countries in Europe and some states in the United States, lack of vaccine or a line of treatment for COVID-19, uncertainty regarding a fresh round of fiscal stimulus from the U.S. government, intensifying geo-political conflict between the United States and China, and the U.S. presidential election scheduled on Nov 3.

Nevertheless, a handful of momentum stocks with a favorable Zacks Rank are flying high after withstanding the September meltdown. These stocks have solid growth potential too. Investment in these stocks is likely to be fruitful in October.

Momentum Investing to the Rescue Amid the Meltdown

Momentum investing calls for a continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only ascend in the short-to-intermediate term.

In the current scenario, the market’s worst appears to be behind us as negative estimates are already factored in valuations. Several economists have pointed out that the pace at which the U.S. economy recovered during the May to July period dwindled in August. Slow growth in job data, retail sales data and durable goods orders are all examples.

However, the vital point here is that the economy  is still growing, albeit at a slow pace, despite the lack of the second tranche of fiscal stimulus amid continued coronavirus-led woes.

On Sep 16, in his lecture after the conclusion of the two-day FOMC meeting,

…