ETF Focus Daily: The Time To Buy Energy Stocks Has Arrived

David Dierking

Good morning! Here's the ETF Daily Trading Digest for Thursday, May 14, 2020.

What To Watch

The Fed seems to have put a damper on short-term market sentiment. Weak price data further reinforces the notion of short-term price deflation and that could be a boon for Treasuries. Riskier equities, including small-caps, appear to be falling out of favor.

Gold remains an important asset to watch here. While the CPI numbers came in low as expected, gold is still hanging out north of $1700. The overall economic picture combined with unlimited government spending is propping up precious metals as the long-term consequences of reckless money printing grow.

3 ETF Trade Ideas For The Week Ahead

Vanguard Energy ETF (VDE)

Energy stocks have experienced a nice rebound off the May bottom and the sector is finally beginning to look a little more stable.

Some of the weaker names have bottomed, while many companies reiterated their dividends, adding another level of reassurance.

If you're willing to hold for at least a year and ride out the short-term volatility, energy looks like a compelling play here.

iShares Russell 2000 ETF (IWM)

Small-caps spent two weeks beating large-caps and offering hope of a further bullish equity rally, but it looks like it's petered out.

Small-caps continue to struggle to gain traction in this narrow market recovery suggesting an overall weakness in equities.

I want to, but it's difficult to get behind small-caps here until we see a sustained level of outperformance vs. large-caps.

iShares Core Dividend Growth ETF (DGRO)

If you're considering adding dividend stocks to your portfolio, DGRO is one of the best in the business.

DGRO targets companies with a history of growing their dividends sustainably, while screening out some of riskier high yields.

It comes with a 3% yield currently and has, historically, been a top-tier performer among dividend ETFs.

Trending Higher

  1. Cloud Computing
  2. Utilities
  3. MLPs

Trending Lower

  1. Small-caps
  2. Banks
  3. Mortgage REITs

Quick Thoughts

Powell's gloomy outlook calling for a longer economic downturn & more stimulus measures has overshadowed any economic reopening optimism. Treasuries & gold outperforming and small-caps underperforming suggests defensive posturing continues.

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