Momentum ETFs in Focus on Trade Deal Optimism

Sweta Jaiswal, FRM

Given the growing concerns over slowing economic growth, a trade deal between the two largest economies is what the market needs now. Spreading optimism, President Trump tweeted that the trade negotiations with Beijing are progressing well. He also mentioned his plans to meet the Chinese Vice Premier Liu He on Oct 11. These tweets received a positive response from the stock markets. Major U.S. stock indices closed around 0.6% higher following the tweets.

The timing of this meeting is also crucial. Notably, Trump had postponed the planned tariff increase of 5% on $250 billion of Chinese goods from Oct 1 to Oct 15 as “a gesture of goodwill.” Thus, it is believed if the trade talks fail, Trump might levy additional tariffs (read: 4 ETFs to Play the Key Events in Q4).

However, the week had started on a relatively disappointing note with Trump administration’s move to ban some of China’s top AI startups. The new list includes around 20 Chinese public security bureaus. Moreover, eight companies, including video surveillance firm Hikvision, along with prominent facial recognition technology companies like SenseTime Group Ltd and Megvii Technology Ltd have been blacklisted (read: Chip ETFs in Focus as Trump Blacklists More Chinese Tech Firms).

Momentum ETFs in Focus

While the broader stock market is expected to move higher on positive developments in trade talks, momentum investing will likely take charge 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. Also, per a Bloomberg report, the momentum funds have staged a rapid comeback following the sell-off in September. As such, we have presented five ETFs that could outperform on positive trade talks news. Further, these could beat broader market returns in the coming months if the positivity prevails.

iShares Edge MSCI USA Momentum Factor ETF MTUM

This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum Index. It charges 15 bps in fees per year and is a popular choice with AUM of $9.27 billion (read: How to Play Stock Rotation With Value ETFs).

Invesco DWA Momentum ETF PDP

This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.55 billion in its asset base and charges 62 bps in annual fees (read: Bet on These Momentum & High-Beta ETFs on Delay in Tariffs).

Invesco S&P MidCap Momentum ETF XMMO

This ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms with the highest momentum scores. XMMO has AUM of $561.8 million and expense ratio of 0.39%.

VictoryShares USAA MSCI USA Value Momentum ETF ULVM

This fund tracks the MSCI USA Select Value Momentum Blend Index, which offers exposure to large and mid-cap companies that have higher exposure to value and momentum factors while also maintaining moderate turnover and lower realized volatility than traditional capitalization weighted indices. It has accumulated $467.6 million in AUM and charges 0.20% in expense ratio (read: read: Momentum ETFs to Buy as US-China Adopt Peacemaking Tone).

SPDR Russell 1000 Momentum Focus ETF ONEO

With AUM of $423.2 million, this product targets large-cap securities with a combination of core factors (high value, high quality, and low size characteristics) and a focus factor comprising high momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index and charges an annual fee of 20 bps.

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Invesco DWA Momentum ETF (PDP): ETF Research Reports
 
SPDR Russell 1000 Momentum Focus ETF (ONEO): ETF Research Reports
 
iShares Edge MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
 
VictoryShares USAA MSCI USA Value Momentum ETF (ULVM): ETF Research Reports
 
Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports
 
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