“Momentum ETFs ought to be wisely used by investors contingent on different regimes. Under some extreme circumstances such as the financial crisis in 2008, all stocks clustered and plunged, betting on any momentum strategies is equivalent to an investment suicide. On the other hand, in this nascent Donald Trump era, the market has displayed somewhat up-trending momentum. NASDAQ, SP500 are hitting record highs, and more investors are pouring in money to ride the wave,” according to Seeking Alpha.
PDP currently allocates almost 27% of its weight to technology stocks. The industrial and consumer discretionary sectors combine for over 34% of the ETF’s weight. Not surprisingly, PDP’s weights to defensive sectors, such as consumer staples and utilities, are low. With the energy sector being the worst-performing group in the S&P 500 this year and displaying no positive momentum traits, that sector commands only token representation in PDP to the tune of one stock.
Fortunately for investors, PDP has been consistently underweight energy during the sector’s struggles in recent years. Year-to-date, investors have pulled $395.1 million from PDP, according to issuer data.
For more on Smart Beta ETFs, visit the Smart Beta Channel home page.