Here's Why it is the Right Time to Invest in Momentum ETFs

Wall Street has seen a lot of turmoil so far in 2020, and the November 3rd election only adds to the uncertainty. However, there were bright spots, for example a spectacular August for the Dow and the S&P 500 since 1984 and 1986, respectively. Also the positive developments regarding the coronavirus vaccine, the support of the Fed, fiscal stimulus in the US and a self recovering US economy with an improving labor market have made investors optimistic about the crisis.
Meanwhile, market participants have become increasingly concerned about a surge in new coronavirus cases in several countries in Europe and some US states, a shortage of vaccines or a line of treatment for coronavirus, and uncertainty about a new round of tax incentives by the US government. In addition, Trump tests that tested positive for coronavirus rocked the markets and made investors increasingly concerned. However, Trump's improving health and his return to the White House from Walter Reed National Military Medical Center have reassured investors to some extent.
In the current situation, analysts believe the worst in the market is largely over as negative estimates have already been factored into valuations. Furthermore, despite the lack of a second round of stimulus packages amid a worsening coronavirus outbreak, the economy is still growing, albeit slowly.
Given the current scenario, investors are desperate to find opportunities to add to their portfolios that can help them win despite the political and health uncertainties. With this in mind, let's take a look at some of the factors that favor an investment in Momentum ETFs:
Reduced election uncertainty
After the first of the three presidential debates in Cleveland, things appear to be in Joe Biden's favor. According to Smarkets, Biden's chances of winning are now 62%, while Trump's chances of winning are 38%, according to a Yahoo Finance article. Data from Oddschecker in the UK shows that Biden's chances of winning have increased to more than 58%, while Trump's have fallen to around 42%, according to the same Yahoo Finance article.
According to a new poll of registered voters published October 4th by the Wall Street Journal / NBC News, Biden leads the presidential race by 53% to 39%, as reported on Yahoo Finance. According to the article, Goldman Sachs believes Democrats who come to power could be good for the US economy.
US economic outlook improving
The US economy is moving towards record growth in the third quarter after a historic collapse from April to June. In its latest September 25 forecast, the Atlanta Fed put third-quarter US GDP growth at 32%. The economy contracted 31.4% in the second quarter, marking its deepest decline since government records began in 1947.
In addition, the labor market continues to improve. According to the U.S. Department of Labor Statistics, the unemployment rate fell 0.5% to 7.9% in September. The unemployment rate not only fell more than expected, it also fell for the fifth month in a row. It's worth noting here that the rate hit 14.7% in April when the pandemic peaked before it subsided.
Fed support
The super-Dovian Fed is positive for the equity market over the long term. On September 16, Fed Chairman Jerome Powell reiterated that the benchmark interest rate would stay at or near zero until at least 2023. A low interest rate will lower the cost of capital for businesses and consumers will have a low deposit rate due to a lower propensity to save. As a result, higher corporate and consumer spending should fuel the economy as a whole and raise stock prices.
Focus on momentum ETFs
Momentum investing seeks to make profits on hot stocks that have been trending upwards in the past few weeks or months. Here we present five ETFs that could outperform current market optimism. Additionally, these could outperform broader market returns in the months ahead if optimism prevails.
iShares MSCI USA Momentum Factor ETF MTUM
This fund offers exposure to large and mid-cap stocks, which have relatively higher price momentum, by tracking the MSCI USA Momentum Index. It charges 15 basis points per year and is a popular choice with an AUM of $ 11.97 billion (see: ETF Strategies to Boost Vaccine Progress, M&A Deals).
Invesco DWA Momentum ETF PDP
This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that have strong relative strength traits. The company has an asset base of $ 2.03 billion and has annual fees of 62 basis points.
Invesco S & P MidCap Momentum ETF XMMO
This ETF follows the S&P Midcap 400 Momentum Index, which is used to identify mid-cap companies with the highest momentum scores. XMMO has an AUM of $ 685.2 million and an expense ratio of 0.39%.
VictoryShares USAA MSCI USA Value Momentum ETF ULVM
This fund tracks the MSCI USA Select Value Momentum Blend Index, which offers exposure to large and medium-sized companies with greater exposure to value and momentum factors, while also exhibiting moderate turnover and lower realized volatility compared to traditional capitalization-weighted indices. It has amassed an AUM of $ 461.7 million and an expense ratio of 0.20%.
SPDR Russell 1000 Momentum Focus ETF ONEO
With an AUM of $ 214.3 million, this product targets large-cap securities with a combination of core factors (high value, high quality and small size characteristics) and a focus factor with high momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index and charges an annual fee of 20 basis points (see: 2 new factor-based ETFs to weather the current volatile market).
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Invesco DWA Momentum ETF (PDP): ETF research reports

SPDR Russell 1000 Momentum Focus ETF (ONEO): ETF Research Reports

iShares MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports

VictoryShares USAA MSCI USA Value Momentum ETF (ULVM): ETF Research Reports

Invesco SP MidCap Momentum ETF (XMMO): ETF Research Reports

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