ETF Strategies to Ride the Year-End Santa Rally

Santa Claus has been kind to Wall Street as the market ended the last week in the green despite initial weakness due to Omicron fears. The Dow Jones Industrial Average increased about 1.6%. The S&P 500 jumped 2.3% and the Nasdaq Composite rose 3.2% in the last week ending Dec 24.

Reopening plays in sectors like airlines, cruise lines and entertainment saw increased investor attention. Carnival (NYSE:CUK) and Hilton Worldwide climbed about 16% and 9.8%, respectively in the holiday-shortened last week.

Investors gained optimism from some of President Joe Biden’s encouraging announcements. Biden stated that booster shots provide strong protection against COVID-19 (per a CNBC article). He also mentioned that the United States will not slip into the intense pandemic conditions faced during March 2020.

Updating about his preparations for the healthcare infrastructure and arrangements, Biden mentioned that the White House is buying 500 million at-home COVID-19 tests that will be available at free of cost for Americans from 2022 (as stated in a CNBC article). Biden also mentioned that 1000 medical personnel will be allocated from the military to assist hospitals if the situation gets severe in January and February.

Notably, three studies from South Africa, England and Scotland demonstrated that the Omicron variant is milder in comparison to the other variants and has been observed to result in lower chances of hospitalization (per a CNBC article).

Moreover, the emergency use authorization (EUA) for Pfizer Inc.’s (NYSE:PFE) antiviral COVID-19 pill, PAXLOVID has relaxed concerns regarding Omicron to some extent. Pfizer can begin delivering PAXLOVIDin the United States on an immediate basis. It is worth noting that in November, Pfizer had informed about signing an agreement with the U.S. government to supply 10 million treatment courses of PAXLOVID. The delivery will be completed in 2022. The FDA had also granted nod to Merck’s antiviral pill for Covid-19.

Here we discuss certain ETF strategies to help investors gain from optimism surrounding the easing Omicron variant concerns amid a recovering U.S. economy:

While the broader stock market is expected to gain on optimism surrounding the rebounding U.S. economy and accelerated distribution of coronavirus vaccine, momentum investing will likely take center stage as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. Investors can consider iShares MSCI USA Momentum Factor ETF A Quick Guide to the 25 Cheapest ETFs ).

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Written By: Zacks Investment Research