Good morning! Here's the ETF Daily Trading Digest for Friday, May 15, 2020.
What To Watch
The Fed's unlimited stimulus program continues with the balance sheet almost at a stunning $7 trillion. Retail sales data will emphasize worries about the economy falling into a deflationary spiral, but I firmly believe that all of this money printing will have a strong inflationary impact, if not immediately then eventually.
Stocks rose into yesterday's close, which is a bullish sign, but equities look like they're ready to give those gains back in early Friday trading. With any COVID-19 headlines in traders' focus, I keep watching for how the states' economic reopenings are going, both in terms of consumer interest and health risks.
3 ETF Trade Ideas For The Week Ahead
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
The Fed's purchase of corporate bond ETFs earlier this week led some to try front-running the transaction.
There was some bounce when the announcement was made earlier, but no reaction once the trade itself was made.
I see no outperformance opportunity here and remain neutral on the entire investment-grade corporate bond space.
U.S. Global Jets ETF (JETS)
JETS is now trading at all-time lows, but the value here is too compelling to ignore.
Airline traffic is next to zero right now, but the airlines are being priced as if the whole sector is going under.
The sector will take years to recover, but at a P/E of 7, it's an excellent buy low opportunity if you're willing to buy and hold for a while.
iShares TIPS Bond ETF (TIP)
Most market watchers are expecting a deflationary spiral here, but I think we'll get inflationary pressure from the Fed stimulus.
The market isn't pricing in future inflation right now, which makes it an ideal time to buy low on TIPS.
The Fed is committed to keeping interest rates low, but the enormous stimulus packages should eventually spike inflation.
- Emerging Markets
- Real Estate
- Latin America
The Fed added more than $300 million in corporate bonds to its balance sheet this week, adding support to this market. Retail sales were abysmal, as expected, and I expect little market reaction. Yesterday's rally off early day lows is an encouraging sign for market bulls.
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