While the recent equities rally may have fizzled thus far this week, the momentum could depend on further action by the federal government. In particular, the Federal Reserve, which shored up the bond markets by agreeing to purchase individual bonds as part of its asset-buying strategy to stave off a recession.
As a Kiplinger article noted, “the government is proving an effective aid to investors right now. Thus, as long as the Fed and Congress appear willing to spend their way out of recovery, it’s impossible to rule out the idea of stocks grinding higher even in the face of worsening COVID-19 data in many parts of the country.”
“Our view since the April FOMC meeting has been to follow the Fed because they print the money and are actually putting it to work,” says Canaccord Genuity equity strategist Tony Dwyer. “We want to add risk as the consolidation plays out. Market swings have been at lightning speed and we believe many of the uncertainties that typically surround a crisis are on the path to recovery.”
One fund to take advantage of momentum is the QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM). The fund itself seeks capital appreciation via active management with the goal of achieving its investment objective by investing at least 80% of its net assets, plus the amounts of any borrowings for investment purposes, in securities of U.S.-listed large-capitalization companies.
The Adviser consults a database generated by Qraft’s AI Quantitative Investment System, which automatically selects and weights portfolios of U.S. large cap companies to provide exposure to a portfolio of 50 companies that have had higher residual returns relative to their similar-sized peers over a rolling 3 to 36-month period.
Momentum to Continue in Healthcare?
With the global economy in full pandemic mode, the healthcare sector was one of the beneficiaries. Investors can look at healthcare-focused ETFs as a potential momentum play, particularly if a second wave of coronavirus cases takes its toll in the second half of the year.
Investors who want to take advantage of the innovations in health care and look to funds like the Principal Healthcare Innovators Index ETF (BTEC). BTEC seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Healthcare Innovators Index.
Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities in the Nasdaq US Benchmark Index (including growth and value stock) that are small and medium capitalization U.S. healthcare companies.
For more market trends, visit ETF Trends.