Before setting off to enjoy the spoils of another Thanksgiving (family, feasting and football), exchange traded funds investors may want to consider doing some pre-Turkey Day shopping.
Although U.S. stocks slightly backed off record highs Tuesday despite a surprise GDP report that said the world’s largest economy grew 3.9% in the third quarter, well above the 3.5% economists expected. The good news is that today is the day to consider broad market ETFs because of the potency of the Thanksgiving trade.
It is only slight hyperbole to say nearly every investor knows about the Santa Claus rally, but not everyone knows that the two best days of the year for the S&P 500 are not near Christmas, but rather Thanksgiving.
“What historically are the two best days to be in the U.S. stock market? According to Brooke Thackray, seasonal ETF strategist with Horizons ETFs, it’s the day before and the day after Thanksgiving! An allocation the S&P 500 or a Canadian stock ETF has served investors well on these days,” according to Horizons ETFs.
The S&P 500 is up 5.4% in the past month and the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and the Vanguard 500 Index (NYSEArca: VOO) are three of this year’s top-asset gathering ETFs. However, lower oil prices have plagued Canada, though the iShares MSCI Canada ETF (NYSE: EWC) is rebounding with a one-month gain of 4.3%.
Data indicate those gains can continue.
“The best two contiguous days on average for the stock market over long-term, are the day before and the day after Thanksgiving. From 1950 to 2013, the two days combined have produced an average cumulative gain of 0.7% and has been positive 84% of the time. In addition, the TSX Composite also has a very strong track record of producing a gain on the Thanksgiving holiday,” according to Thackray’s 2015 Investor’s Guide.
Investors looking to put on a more conservative Thanksgiving trade with income-generating potential should consider the Horizons S&P 500 Covered Call ETF (NYSEArca: HSPX), the covered call equivalent of a basic S&P 500 index ETF.
While HSPX is at its best in down or sideway markets, remember this: Investors are favoring standard low volatility ETFs, but HSPX is actually less volatile than explicit “low vol” funds. [Use This ETF When Volatility Rises]
Additionally, HSPX has credibility as an ETF for income investors. Last month’s spike in volatility juiced options yields, enabling HSPX to pay a dividend of 25 cents per share. That work’s out to be 6.65% on an annualized distribution yield basis. HSPX also pays its dividend monthly, not quarterly. [ETFs for Monthly Dividends]
Horizons S&P 500 Covered Call ETF