Published on 21 Oct 2023 on Zacks · via Yahoo Finance
5 Momentum ETFs That You Can Bet On
Wall Street has been on the rise in recent months, fueled by the surge in technology, easing inflation, stronger-than-expected corporate earnings and hopes that the Fed is nearing the end of its interest rate hike cycle. However, hedge funds and other speculative investors have built up their most bearish position on the stocks since 2007, making investors’ jittery. Against this backdrop, momentum investing would be a winning strategy for those seeking higher returns in a short spell. While momentum has been felt in most of the corners of the market, Invesco DWA Technology Momentum ETF PTF, VanEck Social Sentiment ETF BUZZ, Invesco DWA SmallCap Momentum ETF DWAS, Invesco S&P SmallCap Value with Momentum ETF XSVM and U.S. Quantitative Momentum ETF QMOM are leading the space over the past month.The S&P 500 is heading toward a bull market, following a 19.7% rally from the October 2022 lows. The six technology bigwigs — Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Alphabet (GOOGL, GOOG), Amazon (AMZN) and Meta Platforms (META) — drove 100% of the rally in the S&P 500. Bank of America strategist Michael Hartnett calls these stocks, including Tesla (TSLA), the “Magnificent Seven.” These stocks have together added $3.35 trillion in market value this year. Meanwhile, the tech-heavy Nasdaq Composite Index wrapped up a historic month, outperforming the Dow Jones by the widest margin since October 2001, fueled by the artificial intelligence (AI) boom (read: 5 Stocks That Powered a Historic May for Nasdaq ETF).
Why Momentum?
Momentum investing is an investment strategy that aims to capitalize on the continuance of an existing market trend. It involves the purchase of assets that have been showing an upward trend in price or selling short assets that have been showing a downward trend, with the expectation that the trend will continue. As such, investors can potentially achieve high returns by buying stocks in an uptrend and selling them when they show signs of reversing.Numerous studies have demonstrated the effectiveness of momentum as a factor in stock selection. Momentum strategies have historically performed well across different markets and time periods, although past performance is not indicative of future results.