As the executive branch prepares for a major shift, investors need to know what to look for on an ETF front. During “The Claman Countdown” on Fox Business Network on Wednesday, ETF Trends CEO Tom Lydon discussed the best ETF bets anyone could make under a Biden administration, with host Liz Claman.
To be clear, it’s been a banner year of record flows for ETFs during 2020, with $168 billion in fixed income, $134 billion into equity funds, and $42 billion into commodity ETFs. So, as far as looking into 2021, Lydon has some worthwhile thoughts concerning what funds to look at, regardless of whom anyone voted for.
As Lydon points out, “The great thing is how investors and advisors have done a great job embracing technology and working from home.”
This leads to the Direxion Work From Home ETF (WFH), a huge success for the past few months. As many businesses and employees aren’t going back after the virus is over, WFH encompasses four emerging themes: Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications.
The fund holds 40 equally-weighted U.S. listed securities, with the top-10 companies sorted by thematic relevance of each of the four technological fields. Plus, relative to the Nasdaq-100, WFH’s index has a lower-weighted average market cap, with stronger earnings growth potential, and a lower P/E.
“Another thing to think about is small cap and value,” Lydon states. “These areas of the market have been unloved. But when the country opens up, we’re going to see some great opportunities there.”
Work From Home And Beyond
To contend with this, there’s the iShares US Small-Cap Value Factor ETF (SVAL). It has been up 13% for the last 30-days compared to 4.5% for the S&P 500. Plus, P/E is 12.5 compared to the S&P 500’s P/E trailing earnings of 33.
Additionally, as Lydon points out, “Biden’s a big fan of sustainable energy. His plan, if put in place, will continue to boost solar stocks.”
For this, there’s the Invesco Solar ETF (TAN), which is up 169% year-to-date. Biden previously laid out a $2 trillion sustainable infrastructure plan to pave the way for the U.S. power sector to be carbon-free by 2035 and for the country to be carbon neutral by 2050.
It may be a small area of the market, but it isn’t just the U.S. – clean energy is a global growth trend with Europe focusing on sustainable energy and China cleaning up its pollution problems, which means things could be getting a boost as time moves forward.
“There are a lot of opportunities out there as you look into 2021.”
Even when trying to look at the possible downsides of ETFs, Lydon makes it clear, “There’s so many different choices, themes, sectors, and strategies, that there’s really something out there for everybody.”
“There are tons of new innovative ETFs out there that are going to bring out the next FAANG stocks. Don’t just rest on the S&P 500, with its big weight in FAANG stocks. Look for other types of funds.”
For more market trends, visit ETF Trends.