US-China Close To A Trade Deal? High-Beta & Risky ETFs To Tap
Zacks Investment Research | Mar 03, 2019 08:00PM ET
It appears the world’s key economies are likely to put an end to their year-long trade tensions and at a summit around Mar 27, 10 ETF Areas to Gain as Trump Delays Additional Tariffs ).
Since investors cheered the likely trade truce, markets should rally on a concrete deal. And these high beta and risky ETFs are then likely to be in great shape.
High-Beta ETFs
Beta is directly related to market movement. Notably, high beta funds tend to rise or fall more than the stock market and are thus more volatile. When markets soar, high beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.
Invesco S&P 500 High Beta Portfolio SPHB
The underlying S&P 500 High Beta Index consists of 100 stocks from the S&P 500 index with the highest sensitivity to market movements, or beta, over the past 12 months. The fund charges 25 bps in fees.
High Risk ETFs
As the risk-appetite of investors will increase if the trade deal is clinched leading to a global market rally, investors can play the following ETFs.
VanEck Vectors Fallen Angel High Yield Bond ETF ( (TA:ANGL) )
High-yield bonds are associated with higher default risks. The fund comprises below investment grade corporate bonds denominated in U.S. dollars, issued in the U.S. domestic market. It yields around 5.57% annually.
Invesco Strategic Emerging Markets ETF (ISEM )
The emerging market investing is known as high-risk in nature. The risks associated with emerging markets are Emerging Markets Most Crowded Trade Ever: 5 Hottest ETFs ).
ProShares Ultra S&P 500 ( (BO:SSO) )
Investing in the equity market demands greater apetite for risks than the bond market. The S&P 500, which is in great shape so far this year, is likely to enjoy a strong spell if a trade truce is reached. And upbeat U.S. GDP growth report for Q4, a decent earnings season and a dovish Fed should fan the winning momentum. The euphoria could be tapped via leveraged ETFs like SSO, which is actually risky in nature. The fund looks to offer twice (200%) the daily performance of the S&P 500. Investors should note that the fund is up about 25% this year (read: How to Go Long On the S&P 500 With ETFs ).
iShares Russell 1000 Growth ETF (IWF )
And who can forget growth ETFs? Since many growth stocks trade at a rich valuation and are thus vulnerable to wild price moves , these are normally considered a bit risky. However, the prevailing investing backdrop is one where growth stocks should sizzle. Investors can thus bet on this growth ETF.
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Ark Innovation ETF ( (KW:ARKK) )
This fund comes from the high-growth technology sector. 3D Printing, big data and machine learning, e-commerce and gene therapy are the top holdings of the fund. Since high-growth sectors call for higher risks, the fund may rally in case of a US-China trade truce.
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