Good morning! Here's the ETF Daily Trading Digest for Wednesday, May 13, 2020.
What To Watch
Coronavirus developments continue to dominate the headlines. The equity markets are looking a little fatigued here and could be digesting the possibility that the COVID-19 outbreak gets worse before it gets better. Senate testimony from Dr. Fauci yesterday helped reinforce the notion.
The Fed reiterated its intent to do whatever is necessary to support the economy. While unlimited money printing may or may not prove to be the thing that rescues the economy, it likely comes with eventual consequences, whether that's sparking a spike in inflation, a bear market in bonds or a plunge in the dollar.
3 ETF Trade Ideas For The Week Ahead
SPDR S&P Biotech ETF (XBI)
Since the March low, the biotech sector is up more than 50%, while momentum remains strong but not in overbought territory.
The race to develop COVID-19 therapies and medicines has fueled the gains, but a ripe environment for M&A within the sector is also helping.
A forward P/E ratio of 18 and a PEG ratio of around 1 indicates that the sector is not expensive and still holds some value here.
ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL)
Dividend stocks keep getting punished by the dozens of dividend cuts and suspensions that have been made recently.
Dividend investors should be focusing on companies with healthy balance sheets and long growth histories, not high yields.
With large-caps looking more and more expensive, the better value and risk/reward tradeoff remains in mid-caps.
iShares ESG MSCI USA Leaders ETF (SUSL)
Portfolios using a socially conscious investing strategy have been outperforming the S&P 500 by 1-2% year-to-date.
SUSL has been overweight tech and underweight financials and energy, which has contributed to the outperformance.
Investors looking for cleaner balance sheets and business practices might find ESG a nice defensive option in this market.
- Emerging Markets
- U.S. Dollar
- Real Estate
It looks like the Fed did indeed begin buying corporate bonds yesterday based on flow data. The markets didn't really react as it was expected. Market sentiment seems to be running low as fears of a second coronavirus wave grow. Defensive positioning has increased.
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