The U.S. equities market is pushing toward its tenth-year of a bullish rally and most expect the momentum to continue. Nevertheless, exchange traded fund investors should keep an eye out for areas of potential opportunities.
For instance, the recently passed Tax Cuts and Jobs Act of 2017, or simply the tax reform bill, can help keep the economy and markets going.
“Our opinion is that tax reform can provide more cyclical sectors a head start in the first half of 2018, given the short-term earnings boost they receive under the new corporate tax rates. ETF investors that have been positioning toward these cyclical sectors and value stocks with this in mind will likely continue to do so,” David B. Mazza, Head of ETF Investment Strategy at OppenheimerFunds, said in a research note.
Investors interested in maintaining a cyclical tilt may look to something like the Oppenheimer Russell 1000 Momentum Factor ETF (Cboe: OMOM), which focuses on companies in the Russell 1000 Index that exhibit greater price momentum relative to the broader U.S. equity market. The momentum factor ETF includes cyclical sector exposures including financials 15.8% and consumer discretionary 12.1%, along with large tilts toward growth areas like technology 28.3%.
The Oppenheimer Russell 1000 Value Factor ETF (Cboe: OVLU) may act as a good value focused play. OVLU tracks companies in the Russell 1000 Index that exhibit lower valuations relative to the broader U.S. equity market.
Additionally, OppenheimerFunds believes international assets, notably the emerging markets, may be a standout play for the year.